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The D.R. Horton team delivered an outstanding third quarter, highlighted by a 78% increase in earnings to $3.06 per diluted share. Our consolidated pre-tax income increased 81% on a 35% increase in revenues to $7.3 billion and our pre-tax profit margin improved 490 basis points to 19.4%. Our homebuilding return on inventory for the trailing 12-months ended June 30 was 34.9% and our consolidated return on equity for the same period was 29.5%. Housing market conditions remained very robust, and we are focused on maximizing returns and increasing our market share further. As our top priority is to consistently fulfill our commitments to our homebuyers, we have slowed our home sales pace to more closely align to our current production levels and are selling homes later in the construction cycle, when we can better ensure the certainty of home close date for our homebuyers. We started construction on 22,600 homes this quarter and our homes in inventory increased 44% from a year ago to 47,300 homes at June 30, 2021, positioning us to finish 2021 strong and to achieve double-digit growth again in 2022. Earnings for the third quarter of fiscal 2021 increased 78% to $3.06 per diluted share compared to $1.72 per share in the prior year quarter. Net income for the quarter increased 77% to $1.1 billion compared to $630.7 million. Our third quarter home sales revenues increased 35% to $7 billion on 21,588 homes closed, up from $5.2 billion on 17,642 homes closed in the prior year. Our average closing price for the quarter was $326,100 and the average size of our homes closed was down 2%. The value of our net sales orders in the third quarter increased 2% from the prior year to $6.4 billion, while our net sales orders for the quarter decreased 17% to 17,952 homes. Our average number of active selling communities increased 1% from the prior year quarter and was down 3% sequentially. Our average sales price on net sales orders in the third quarter was $359,200. The cancellation rate for the third quarter was 17%, down from 22% in the prior year quarter. As David described, in this very strong demand environment, our local teams are restricting the sales order pace in each of their communities based on the number of homes in inventory, construction time and lot position. However, we are confident that we will be well-positioned to deliver double-digit volume growth in fiscal 2022 with 32,200 homes in backlog, 47,300 homes in inventory, a robust lot supply and strong trade and supplier relationships. Our gross profit margin on home sales revenue in the third quarter was 25.9%, up 130 basis points sequentially from the March quarter. On a per square foot basis, our revenues were up 4.7% sequentially, while our stick and brick cost per square foot increased 3.5% and our lot cost increased 1.7%. In the third quarter, homebuilding SG&A expense as a percentage of revenues was 7.1%, down 80 basis points from 7.9% in the prior year quarter. This quarter, we started 22,600 homes, up 33% from the third quarter last year, bringing our trailing 12-month starts to 94,500 homes. We ended this quarter with 47,300 homes in inventory, up 44% from a year ago. 15,400 of our total homes at June 30 were unsold, of which 500 were complete. At June 30, our homebuilding lot position consisted of approximately 517,000 lots, of which 24% were owned and 76% were controlled through purchase contracts. 25% of our total owned lots are finished and at least 44% of our controlled lots are or will be finished when we purchase them. Our third quarter homebuilding investments in lots, land and development totaled $1.8 billion, of which $910 million was for finished lots, $540 million was for land development and $350 million was to acquire land. $300 million of our total lot purchases in the third quarter were from Forestar. Forestar, our majority owned subsidiary, is a publicly traded well-capitalized residential lot manufacturer operating in 55 markets across 22 states. Forestar is delivering on its high-growth expectations and now expects to grow its fiscal 2021 lot deliveries by approximately 50% year-over-year to a range of 15,500 to 16,000 lots with a pre-tax profit margin of 11.5% to 12%, excluding their $18.1 million loss on extinguishment of debt recognized during the quarter. At June 30, Forestar's owned and controlled lot position increased 91% from a year ago to 96,600 lots. 61% of Forestar's owned lots are under contract with D.R. Horton or subject to a Right of First offer under our master supply agreement. Forestar is separately capitalized from D.R. Horton and had approximately $470 million of liquidity at quarter end with a net debt-to-capital ratio of 37.8%. Financial Services pre-tax income in the third quarter was $70.3 million with a pre-tax profit margin of 37.3% compared to $68.8 million and 43.9% in the prior year quarter. For the quarter, 98% of our mortgage company's loan originations related to homes closed by our homebuilding operations and our mortgage company handled the financing for 66% of our homebuyers. FHA and VA loans accounted for 45% of the mortgage company's volume. Borrowers originating loans with DHI Mortgage this quarter had an average FICO score of 721 and an average loan-to-value ratio of 89%. First-time homebuyers represented 58% of the closings handled by the mortgage company this quarter. At June 30, our multi-family rental operations had 11 projects under active construction and an additional four projects that are completed and in the lease-up phase. Our multi-family rental assets sold $458.3 million at June 30. During the third quarter, we sold our second single-family rental community for $23.1 million in revenue and $11.4 million of gross profit. At June 30, our homebuilding inventory included $303.1 million of assets related to 44 single-family rental communities, compared to $87.2 million of assets related to 10 communities at the beginning of the fiscal year. During the nine months ended June, our cash provided by homebuilding operations was $276 million even while we have reinvested significant operating capital to expand our homebuilding inventories in response to strong demand. At June 30, we had $3.7 billion of homebuilding liquidity, consisting of $1.7 billion of unrestricted homebuilding cash and $2 billion of available capacity on our homebuilding revolving credit facility. Our homebuilding leverage was 16% at the end of June with $2.5 billion of homebuilding public notes outstanding and no senior note maturities in the next 12 months. At June 30, our stockholders' equity was $13.8 billion and book value per share was $38.54, up 27% from a year ago. For the trailing 12-months ended June, our return on equity was 29.5% compared to 19.9% a year ago. During the quarter, we paid cash dividends of $72.1 million and our Board has declared a quarterly dividend at the same level as last quarter to be paid in August. We repurchased 2.6 million shares of common stock for $241.2 million during the quarter for a total of 8.1 million shares repurchased fiscal year-to-date for $661.4 million. Our remaining share repurchase authorization at June 30 was $758.8 million. In the fourth quarter of fiscal 2021, based on today's market conditions, we expect to generate consolidated revenues of $7.9 billion to $8.4 billion and our homes closed to be in a range between 23,000 and 24,500 homes. We expect our home sales gross margin in the fourth quarter to be in the range of 26% to 26.3% and homebuilding SG&A, as a percentage of revenues, in the fourth quarter to be approximately 7%. We anticipate our Financial Services pre-tax profit margin in the range of 40% to 45% and we expect our income tax rate to be approximately 23.5%. For the full fiscal year of 2021, we now expect consolidated revenues of $27.6 billion to $28.1 billion and to close between 83,000 and 84,500 homes. Our other cash flow priorities remain balanced among increasing our investment in our multi and single-family rental platforms, maintaining conservative homebuilding leverage and strong liquidity, paying a dividend and repurchasing shares to reduce our outstanding share count by approximately 2% from the beginning of fiscal 2021.

The D.R. Horton team delivered an outstanding third quarter, highlighted by a 78% increase in earnings to $3.06 per diluted share. Our consolidated pre-tax income increased 81% on a 35% increase in revenues to $7.3 billion and our pre-tax profit margin improved 490 basis points to 19.4%. Housing market conditions remained very robust, and we are focused on maximizing returns and increasing our market share further. As our top priority is to consistently fulfill our commitments to our homebuyers, we have slowed our home sales pace to more closely align to our current production levels and are selling homes later in the construction cycle, when we can better ensure the certainty of home close date for our homebuyers. We started construction on 22,600 homes this quarter and our homes in inventory increased 44% from a year ago to 47,300 homes at June 30, 2021, positioning us to finish 2021 strong and to achieve double-digit growth again in 2022. Earnings for the third quarter of fiscal 2021 increased 78% to $3.06 per diluted share compared to $1.72 per share in the prior year quarter. Our third quarter home sales revenues increased 35% to $7 billion on 21,588 homes closed, up from $5.2 billion on 17,642 homes closed in the prior year. The value of our net sales orders in the third quarter increased 2% from the prior year to $6.4 billion, while our net sales orders for the quarter decreased 17% to 17,952 homes. As David described, in this very strong demand environment, our local teams are restricting the sales order pace in each of their communities based on the number of homes in inventory, construction time and lot position. However, we are confident that we will be well-positioned to deliver double-digit volume growth in fiscal 2022 with 32,200 homes in backlog, 47,300 homes in inventory, a robust lot supply and strong trade and supplier relationships. We ended this quarter with 47,300 homes in inventory, up 44% from a year ago. For the full fiscal year of 2021, we now expect consolidated revenues of $27.6 billion to $28.1 billion and to close between 83,000 and 84,500 homes.

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We delivered strong third quarter topline growth, up 19% versus 2020 results with Mineral Fiber sales increasing 15% and Architectural Specialties sales improving 31%. Adjusted EBITDA of $99 million was 8% ahead of prior year results. Specifically within our Mineral Fiber segment, we reported third quarter AUV growth of 14% which is the highest level we've achieved since we separated from the flooring business in 2016. And I can share with you with great satisfaction that this measure not only remained above our 90% threshold throughout 2021 for the Mineral Fiber segment in particular but it's improved in the third quarter. Because of their design, our SimpleSoffit systems can be installed up to 3 times faster than traditional methods, with less material and labor hours. New construction and major renovation activity improved but was uneven due to project delays, even with those challenges and our continued growth investments in this segment, Architectural Specialties' EBITDA margin improved 350 basis points sequentially and I expect these improvements to continue back above the 20% level. GDP forecast remained above 5%, the Architectural Billing Index ended September well into expansionary territory at 56.6, up from August reading of 55.6, similar to the second quarter of Dodge data for both bidding and construction starts improved double-digits. Adjusted net sales of $292 million were up 19% versus prior year. Adjusted EBITDA grew 8% and EBITDA margins contracted 320 basis points. Adjusted diluted earnings per share of $1.17 was 9% above prior year results. Adjusted free cash flow was 28% above prior year results. Our balance sheet remains healthy as we ended the quarter with $439 million of available liquidity, including a cash balance of $94 million and $345 million of availability on our revolving credit facility. Net debt at the end of the quarter was $533 million and our net debt to EBITDA ratio of 1.5, as calculated under the terms of our credit agreement, remains well below our covenant threshold of 3.75. In the quarter, we repurchased 187,000 shares for $20 million, for an average price of about $107 per share. As of September 30, we had $544 million remaining under our repurchase program, which expires in December 2023. Last week, we announced a 10% increase in our quarterly dividend, this is our third increase in the last three years and when paired with our share repurchases, is a reflection of our commitment to our balanced and disciplined capital allocation priorities that continue to be investing in the business, expanding into adjacencies through acquisitions, and returning capital to shareholders. The $8 million adjusted EBITDA gain was primarily due to favorable AUV driven by positive like-for-like pricing and favorable channel mix, increased volume driven by the 2020 acquisitions, and contributions from WAVE equity earnings. We expect inflationary pressure to continue into the fourth quarter, we now see cost of goods sold inflation somewhere in the 4.5% to 5% range for the full year 2021. In the quarter, sales increased 15%, mostly due to favorable AUV previously mentioned. Mineral Fiber segment adjusted EBITDA increased 10%, driven by the AUV gains and another strong quarter of equity earnings from the WAVE joint venture. In addition, we experienced a $3 million headwind due to unplanned maintenance activities at two of our larger plants. Third quarter adjusted net sales grew 31% or $19 million with the 2020 acquisitions in terms of Turf, Moz, Arktura, contributing $16 million and organic sales increasing $3 million. AS segment adjusted EBITDA increased 1% as improved sales from the 2020 acquisitions and the organic business more than offset project push outs, higher SG&A, and increased manufacturing costs. The adjusted EBITDA margin for the segment improved 350 basis points sequentially from the second quarter but contracted 500 basis points when compared to the third quarter 2020 results. Sales for the first nine months of the year were up 18% and adjusted EBITDA increased 10%. Adjusted diluted earnings per share increased 12% to $3.28. We are narrowing our guidance ranges for all key metrics and now we expect year-over-year revenue growth of 17% to 18%, adjusted EBITDA growth of 13% to 15%, adjusted earnings per share growth of 14% to 16%, and adjusted free cash flow of down 7% to 2%. You'll notice the increase in Mineral Fiber AUV range from 9% to 11% as our teams continue to do a great job of realizing price from our three Mineral Fiber increases this year. We're bringing down the range of our Mineral Fiber volume to 1% to 2% as near-term choppiness remains and projects are delayed into the out months and 2022. We now expect the 2020 acquisitions to contribute about 30% growth and AS organic in the mid-to-high single-digit range. On a year-to-date basis, sales of these products have increased 38% versus 2020 and over 20% versus 2019 levels. What's most encouraging is that approximately 60% of these sales are now coming from outside of the healthcare vertical.

Adjusted diluted earnings per share of $1.17 was 9% above prior year results.

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In the fourth quarter, we recorded an after-tax special item charge of $119 million or $0.36 per share related to a strategic plan to further leverage the company's ongoing growth to drive operational efficiency through enhancements to organizational structure and increased use of automation and shared services. We also recorded an after-tax special item charge of $70 million or $0.21 per share for integration and transaction-related costs. As a result, our 70,000-plus colleagues around the world continue to deliver differentiated value for those we serve and also continue to grow our businesses. In 2021, we grew full-year adjusted revenues to $174 billion, a second consecutive year of growth above our long-term target. We delivered full-year adjusted earnings-per-share growth of 11% and to $20.47, and we returned over $9 billion to shareholders in dividends and share repurchases. We grew adjusted revenues by 14% in 2021 as Evernorth's corporate clients, health plans, governmental agencies, and healthcare delivery system partners increasingly recognized the value of our health services, including in our specialty pharmacy business, which I'll discuss in more detail in just a moment; in our virtual health capabilities, which have been expanded through MDLIVE to include urgent and dermatology care as well as behavioral health services; in our core pharmacy services portfolio, which continues to generate outstanding results for our clients; and we are further broadening our reach through deeper and new partnerships. As a result, our medical care ratio for Cigna Healthcare was 84% for full year 2021. As I highlighted earlier, the breadth and complementary nature of our portfolio enabled us to exceed our revenue and earnings per share outlook and return over $9 billion of capital to our shareholders. By 2025, for example, 66 biologic drugs currently in the market will have the patents expire, opening the door for increased biosimilar competition and an increasing opportunity to decrease healthcare spending by an estimated $100 billion. For 2022, we entered three new states and 93 new counties. With these markets, for example, we have the ability to reach an additional 1.5 million additional customers. Our earnings per share outlook of at least $22.40 and the increase of our quarterly dividend by 12% reinforces the sustained growth and strength of our businesses. We delivered adjusted earnings per share of $20.47 and returned over $9 billion of capital to our shareholders in dividends and share repurchase. Key consolidated financial highlights for full year 2021 include adjusted revenue growth of 9% to $174 billion or growth of 12% when adjusting for the sale of the group disability and life business. Adjusted earnings of $7 billion after tax and adjusted earnings-per-share growth of 11% to $20.47. Fourth quarter 2021 adjusted revenues grew 15% to $35.1 billion, while adjusted pre-tax earnings grew to $1.6 billion. Overall, fourth-quarter adjusted revenues were $11.2 billion, adjusted pre-tax earnings were $472 million and the medical care ratio was 87%. For full year 2021, we finished with the medical care ratio of 84%. We ended the year with 17.1 million total medical customers, an increase of approximately 430,000 customers for the full year. The fourth-quarter adjusted loss was $115 million and now includes positive earnings contributions from our international life accident and supplemental benefits businesses held-for-sale pending divestiture. As Ralph noted, during the fourth quarter, we reported a special item charge of $119 million after tax related to actions to improve our organizational efficiency. In total for the company, we expect consolidated adjusted revenues of at least $177 billion, representing growth of approximately 4%, excluding the impact from previously announced divestitures. We expect full-year consolidated adjusted income from operations to be at least $6.95 billion or at least $22.40 per share, consistent with our prior earnings per share commentary. We project an expense ratio in the range of 6.9% to 7.3%, further improving upon our operational efficiency and ensuring continued affordable solutions for our clients and customers. And we expect a consolidated adjusted tax rate in the range of 22% to 22.5%. For Evernorth, we expect full year 2022 adjusted earnings of approximately $6.1 billion. This represents growth of about 5% over 2021, within our targeted long-term income growth range, reflecting strong growth in Accredo specialty pharmacy, all while we continue to increase investments in order to drive new innovative solutions to the market. For Cigna Healthcare, we expect full year 2022 adjusted earnings of approximately $3.9 billion. We expect the 2022 medical care ratio to be in the range of 82% to 83.5%. This action has contributed to results within our commercial book of business, where we are now seeing fewer than 20% of all knee and hip replacements occur in an inpatient hospital setting, down from over 75% in 2019. In 2021, we finished the year with $7.2 billion of cash flow from operations. Additionally, we returned over $9 billion to shareholders via dividends and share repurchase in 2021, a significant increase from 2020. We expect at least $8.25 billion of cash flow from operations, up more than $1 billion from 2021, reflecting the strong capital efficiency of our well-performing business. We expect to deploy approximately $1.25 billion to capital expenditures, an increase from our 2021 capex levels. We expect to deploy approximately $1.4 billion to shareholder dividends, reflecting our meaningful quarterly dividend of $1.12 per share, a 12% increase on a per-share basis. Our guidance assumes full year 2022 weighted average shares to be in the range of 308 million to 312 million shares. Year to date, as of February 2, 2022, we have repurchased 2.5 million shares for $581 million. We are confident in our ability to deliver our 2022 full-year adjusted earnings of at least $22.40 per share, consistent with our prior earnings per share commentary.

In the fourth quarter, we recorded an after-tax special item charge of $119 million or $0.36 per share related to a strategic plan to further leverage the company's ongoing growth to drive operational efficiency through enhancements to organizational structure and increased use of automation and shared services. In total for the company, we expect consolidated adjusted revenues of at least $177 billion, representing growth of approximately 4%, excluding the impact from previously announced divestitures. We expect full-year consolidated adjusted income from operations to be at least $6.95 billion or at least $22.40 per share, consistent with our prior earnings per share commentary. We expect the 2022 medical care ratio to be in the range of 82% to 83.5%. We expect to deploy approximately $1.4 billion to shareholder dividends, reflecting our meaningful quarterly dividend of $1.12 per share, a 12% increase on a per-share basis.

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However, our 24% depletions growth for the second quarter decelerated from our first quarter growth of 48% and was below our expectations as the hard seltzer category and the overall beer industry were softer than we had anticipated. In measured off-premise channels in the first half of this year where our brand portfolio represented 4% of total industry volume, we delivered over 45% of industry volume growth. The overall Truly brand growth rate improved to 2.7 times the hard seltzer category growth rate in the latest 13 weeks, resulting in a 4 point share gain and closing the share gap to the number one brand to single digits. Based on information in hand, year-to-date depletions reported to the Company to the 28 weeks ended July 10, 2021 are estimated to have increased approximately 32% from the comparable weeks in 2020. For the second quarter, we reported net income of $59.2 million, a decrease of $0.9 million or 1.6% from the second quarter of 2020. Earnings per diluted share were $4.75, a decrease of $0.13 per diluted share from the second quarter of 2020. Shipment volume was approximately 2.45 million barrels, a 27.4% increase from the second quarter of 2020. Our second quarter 2021 gross margin of 45.7% decreased from the 46.4% margin realized in the second quarter of 2020, primarily as a result of higher processing and other costs due to increased production at third party breweries, partially offset by price increases and cost saving initiatives at company owned breweries. Second quarter advertising, promotional and selling expenses increased by $61.3 million from the second quarter of 2020, primarily due to increased brand investments of $41.2 million, mainly driven by higher media, production and local marketing costs and increased freight to distributors of $20.1 million that was primarily due to higher rates and volumes. General and administrative expenses increased by $3.3 million from the second quarter of 2020, primarily due to increases in external services and salaries and benefits costs. Based on information of which we are currently aware, we are now expecting full year 2021 earnings per diluted share of between $18 and $22, a decrease from the previously communicated range of between $22 and $26. Excluding the impact of ASU 2016-09, the actual results could vary significantly from this target. We're currently planning increases in shipments and depletions of between 25% and 40%, a decrease from the previously communicated range of between 40% and 50%. We're targeting national price increases per barrel of between 1% and 3%. Full year 2021 gross margins are currently expected to be between 45% and 47%. We plan increased investments in advertising, promotional and selling expenses of between $80 million and $100 million for the full year 2021, a decrease from the previously communicated range of between $130 million and $150 million. We estimate our full year 2021 non-GAAP effective tax rate to be approximately 26 % excluding the impact of ASU 2016-09. We're not able to provide forward guidance on the impact that ASU 2016-09 will have on our 2021 financial statements and full year effective tax rate, as this will mainly depend upon unpredictable future events, including the timing and value realized upon the exercise of stock options versus the fair value when those options are granted. We're continuing to evaluate 2021 capital expenditures and currently estimate investments of between $180 million and $230 million, a decrease and a narrowing from the previously communicated range of between $250 million and $350 million. We expect that our cash balance of $103 million as of June 26, 2021 along with our future operating cash flow and unused line of credit of $150 million will be sufficient to fund future cash requirements.

Earnings per diluted share were $4.75, a decrease of $0.13 per diluted share from the second quarter of 2020. We're not able to provide forward guidance on the impact that ASU 2016-09 will have on our 2021 financial statements and full year effective tax rate, as this will mainly depend upon unpredictable future events, including the timing and value realized upon the exercise of stock options versus the fair value when those options are granted.

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Our consolidated earnings for the second quarter of 2021 were $0.20 per diluted share compared to $0.26 for the second quarter of 2020. For the year-to-date, consolidated earnings were $1.18 per diluted share for 2021 compared to $0.98 last year. On June 29, Spokane temperature soared to 109 degrees, setting new record -- a new record high temperature and was even higher in many of our neighborhoods. Six of our 140 distribution substations were impacted. We are confirming our 2021 earnings guidance with a consolidated range of $1.96 to $2.16 per diluted share. While we are confirming our consolidated range, we are adjusting our 2021 segment ranges to lower Avista Utilities by $0.10 per diluted share and raise other by $0.10 per diluted share. For 2022, we are lowering consolidated earnings guidance by $0.15 per diluted share to a range of $2.03 to $2.23 per diluted share. For 2023, we are confirming our earnings guidance with a consolidated range of $2.42 and to $2.62 per diluted share. For 2021, we expect Avista Utilities to contribute in the range of $1.83 to $1.97 per diluted share, and the lower end of our guidance in '21 and '22 for the Avista Utilities is primarily due to increased regulatory lag. And our current expectation for the ERM is a surcharge position within the 90-10 sharing -- company sharing band, which is expected to decrease earnings by $0.08 per diluted share. And recall, last quarter, our estimate for the ERM for the year was in a benefit position, which was expected to add $0.06 per diluted share. For 2021, as Dennis mentioned, we expect AEL&P to contribute $0.08 to $0.11. And we increased the range in our other businesses by $0.10, which really offsets the utility reduction, and that's largely due to a range of $0.05 to $0.08 of diluted share because of investment gains and the gain we experienced from the sale of Spokane Steam Plant. Avista Utilities contributed $0.11 per diluted share compared to $0.26 in 2020. Our hydroelectric generation is about 91% of -- our expectations are normal for this year. Had a pre-tax expense of $7.6 million in the second quarter of '21 compared to a pre-tax benefit of $0.4 million in 2020. Year-to-date, we've recognized $3.3 million of expense in '21 compared to $5.6 million in benefit in 2020. We currently expect Avista Utilities to have increased capital expenditures up to $450 million in 2021 and $415 million in 2022 -- or $445 million in '22 and '23. That's a $35 million and $40 million increase in '21, '22 and '23, $40 million in '23 as well. Our customer growth's about 1.5%, which is up from 0.5% to 1% in prior expectations. We expect to issue approximately $140 million of long-term debt and $90 million of common stock, including $16 million that we've already issued through June on the common stock side in 2021.

Our consolidated earnings for the second quarter of 2021 were $0.20 per diluted share compared to $0.26 for the second quarter of 2020. We are confirming our 2021 earnings guidance with a consolidated range of $1.96 to $2.16 per diluted share. For 2022, we are lowering consolidated earnings guidance by $0.15 per diluted share to a range of $2.03 to $2.23 per diluted share. For 2023, we are confirming our earnings guidance with a consolidated range of $2.42 and to $2.62 per diluted share.

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There is still some uncertainty around it, but a hell of a lot less than this time 90 days ago. Quickly looking back to this quarter, I'm very happy with the results where we announced $0.89 per share or $85.7 million in earnings. That compares to $0.70 last quarter. And if you compare to the fourth quarter of 2019, which feels like a 100 years ago, it was $0.91. Sorry, NII was $193 million and change, which was $6 million more than our last quarter, about $8 million more than fourth quarter of 2019. PPNR was down by $10 million compared to the last quarter, but showed a little increase compared to the fourth quarter of a prior year. Total cost of deposits declined by 14 basis points. We were at 57 basis points last quarter. This quarter we ended up at 43 basis points. And if you look at our stock cost of funds at December 31, we were at 36 basis points. So in other words we're starting this quarter already at 36 basis points and working our way down from there. So that's sort -- the one side but also our average DDA -- non-interest DDA grew by $966 million, which is again very, very strong. You should always look at four quarter average or four quarter -- or last 12 month numbers to really get a feel for how the business is doing. Our non-interest DDA now stands by the way at over 25%. And I think a year ago we were at 18%. We are expecting this trend to continue into next year and for us to slowly work our way toward 30% DDA. I think for the first nine months of 2020 there was downward rating migration on $2.1 billion in loans. This quarter it was $169 million. In fact, we have a net recovery of a small number of $1.6 million. Also we had reported back in the summer, $3.6 billion in loans that were on deferral, if you remember. That number is now down to $207 million or about 1% of total loans. We do have $587 million in loans that were modified under the CARES Act. But nevertheless these modifications by the way are mostly IL modifications or 9 months to 12 months. NPLs ticked up a little bit to $244 million, which is about 1.02% of loans but excluding the government guarantee sort of SBA loans that are in this bucket if you take that out, it's about 80 basis points. The net charge-off rate was stable at 26 basis points for the year. NIM was 2.33% for the quarter, I think last quarter was 2.32%, so 1 basis point improvement. Total loans grew by $87 million and deposits grew $899 million total of which $219 million was non-interest DDA. Book value is now up at $32.05, which is higher than what it was at this time last year, it was $31.33. If you remember when we started we still had about $45 million left. Capital is -- CET1 is at 12.6% at holdco, it's 13.9% at the bank, and we, of course, declared our usual $0.23 per share dividend. Also we haven't lost sight of all the initiatives we had in 2.0. As Raj mentioned, total deposits grew by $899 million for the quarter and non-interest DDA grew by $219 million for the quarter. We allowed higher cost deposits to run off this quarter, which we continued to do for the last few quarters as time deposits declined by $1.1 billion for the quarter. So the total cost of funds plus cost of deposits declined to 43 basis points this quarter. On a spot basis, the APY on total deposits was 36 basis points at December 31, which was down from a spot of 49 basis points at September 30, when compared to last year at December 31 it was 142 basis points. The spot rate on interest bearing deposits was 48 basis points as of December 31 compared with 65 basis points at September 30 and 171 basis points a year ago. As we think about December 31, 2020, we had $1 billion of CDs in the book at an average rate of 1.61% that had not yet repriced since the last Fed cut in March of 2020. So in the first quarter of this year, we have a significant amount of that just under $800 million that will reprice in this quarter. So there's a very significant difference between what these will reprice at our current rates or running about 25 basis points. Switching to the loan side, as Raj mentioned in aggregate, total loans grew by $87 million in the fourth quarter and operating leases declined by $13 million. Just a little bit more detail on some of the segments, the residential portfolio grew by $408 million in the fourth quarter, of that $330 million was in the Ginnie Mae EBO segment. Total commitments grew by $90.5 million for the quarter and we ended the year at a little over $2.1 billion in mortgage warehouse commitments so the entire quarter and year was obviously very strong in the mortgage warehousing area. In the aggregate, commercial real estate loans declined by $89 million for the quarter, multi-family declined by $171 million of which $151 million was in the New York market. If we look at loans and operating leases in aggregated BFG, including both franchise and equipment, we're down this year by -- down for the quarter by $124 million, given the COVID impact on the BFG portfolio in particular especially the franchise. And in the franchise area, we expect to see that continue to run off probably in the 20% kind of range in 2021 as we continue to work through that. We're in the forgiveness stage of -- on 3,500 loans that we originally made in round one to PPP, that's going very smoothly. We probably have about 700 loans so far that have been forgiven and we expect that to continue in the first quarter of 2021. We're expecting maybe a 50% to 60% Second Draw request from clients that we had in the First Draw. So starting commercial, only $63 million of commercial loans were still under short term deferral at December 31. $575 million of commercial loans had been modified under the CARES Act. So taken together this was $638 million or approximately 4% of the total commercial portfolio as of December 31. Not unexpectedly the portfolio segment most impacted has been the CRE Hotel segment, where $343 million or 55% of the segment has been modified as of December 31. On the franchise side, 8% or $46 million of the franchise portfolio was on short-term deferral or had been modified as of December the 31 compared to $76 million or 12% that were on short-term deferrals as of September 30 and 74% that were granted initial 90-day payment deferrals. $48 million or 67% of our cruise line exposure has been modified under the CARES Act of December 31. Almost 80% of the total commercial deferrals and modifications and almost 60% of the total loans risk rated substandard or doubtful are from portfolio segments that we had initially identified as -- meeting of heightened monitoring due to potential impacts from the pandemic. On the residential side, excluding the Ginnie Mae early buyout portfolio, $144 million of loans are on short-term deferral, an additional $12 million had been modified under a longer-term CARES Act repayment plan at December 31. This totaled about 2% of the residential portfolio. Of the $525 million in residential loans that were granted at initial payment deferral, $144 million or 27% are still on deferral, while $381 million or 73% of those loans have now rolled off. Of those that have rolled off, $362 million or 95% are now making regular payments while only 5% or $19 million have not resumed a regular payment program. As Raj said most of these have taken the form of 9 to 12 months interest only deferrals. Depending upon the geography we're seeing 90% or so in the New York market, 97% in Florida. Multi-family collections are running 90% in New York and about 96% in Florida and for our larger retail loans we're seeing -- sort of low 90% rates in the retail space. We saw about a 46% average occupancy rate for the quarter. In December, we saw occupancy rates in some areas as high as the 60% range. So basically 90% of our stores are open at this point. They're not all operating in a 100% level, but this is the highest rate of openings that we have seen since the pandemic started. So with the exception of just California, at this point of 280 stores that we have 90% of them are open. Overall the provision for credit losses for the quarter was a net credit or recovery of $1.6 million compared to a provision of $29.2 million last quarter. That $1.6 million consisted of a $1.2 million provision related to funded loans and a recovery of $2.9 million related to unfunded commitments. The reserve, the ACL declined from 1.15% to 1.08% of loans this quarter primarily because of charge-off, which is exactly what we would expect to happen under CECL, less charge-offs are taken the reserve would come down. Slide 9 through 11 of the supplemental deck provides some details on changes in the reserve and the composition of the provision and the allowance. Charge-offs totaled $18.8 million for the quarter, which reduced the reserve. $13.8 million of this related to the writedown to market of some loans that we sold during the quarter or that were moved to held for sale right at quarter end and those were sold in January. A $34.1 million and all of the rest of the stuff that ran through the provision, the $34.1 million decrease in the reserve and provision related to the improvement in the economic forecast. Offsetting that was a $32.8 million increase related to increases in some specific reserves and that risk rating migration. We had an $11.4 million reduction in the amount of qualitative overlays. And then we also had an increase of $15.2 million related to more conservative modeling assumptions that we've made around behavior of certain residential borrowers that had been on payment deferral so all of that going in opposite directions kind of netted down to that provision of basically zero for the quarter. But our forecast is for national unemployment at about 6.7% for the first quarter of '21, remaining stable through 2021 and then trending down to 5.4% by the end of 2022. Real GDP growth reaching 4.1% in 2021 and 4.7% by the end of 2022 and S&P 500 Index remain relatively stable around 3,500 and stabilizing Fed funds rate staying at or near zero into 2023. The franchise finance portfolio continues to carry the highest reserve level at 6.6%, followed by CRE at 1.5% and C&I at 1.3%. As to risk rating migration on slides 23 through 26 in the deck, we have some detail around this not surprisingly as we continue to move through the cycle and get more detailed information about borrowers. Non-performing loans increased by about $44 million this quarter, the largest increases being in multi-family. The portfolio is now in a net unrealized gain position of $85.6 million and we expect no credit losses related to any of the securities in that portfolio. Consistent with the guidance we provided last quarter, the NIM increased by 1 basis point this quarter to 2.33%. The yield on earning assets declined by 12 basis points and this was -- there's still pressure on asset yields, but this was a much lower -- a smaller decline than we had experienced the quarter before. Cost of deposits declined by 14 basis points quarter-over-quarter. And as Tom pointed out, I'll remind you that almost $800 million of those time deposits are scheduled to mature and price down in Q1. We did adjust our variable compensation accruals by $6.6 million as operating results in the back half of the year. A $2.2 million accrual for some roll over vacation time that we made the decision to allow our employees due to the COVID pandemic and the difficulty people have had using their vacation time. I think there's about $11 million worth of unrecognized fees still remaining to flow through that will come through in the first and maybe some in the second quarter. Tax rate, we would expect to be around 25% excluding discrete items, if there's no change in the corporate tax rate. The other -- the one other thing that I will point out to you, we had about 3 million dividend equivalent rights outstanding that expire in the first quarter of 2021. And that'll add $0.02 to $0.03 per quarter to EPS.

Quickly looking back to this quarter, I'm very happy with the results where we announced $0.89 per share or $85.7 million in earnings.

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FNB's third quarter earnings per share was $0.34, representing an increase of 10% on a linked-quarter basis and bringing year-to-date earnings per share to $0.94. Our performance across our core businesses led to record revenue this quarter of $321 million, up 18% on a linked-quarter annualized basis with strong underlying momentum visible on our loan growth, pipeline, fee income, and digital customer engagement. Our spot loan growth, excluding the impact of PPP forgiveness, is 8% annualized linked-quarter, driven by a strong pickup in lending activity in both the commercial and consumer portfolios. Spot commercial loan growth totaled 7% annualized on a linked-quarter basis with positive growth in nearly every region across our footprint, notably the Pittsburgh, Cleveland, Harrisburg, and Raleigh region. Consumer lending grew over 8% annualized linked-quarter, led by increases in residential mortgages and direct installment home equity. We saw healthy pipeline build and a slight increase in line utilization with the pipeline being up nearly 12% year-over-year. Commercial had record production in September and the consumer pipeline jumped 27% year-over-year. As we have continued to execute our strategic plan, non-interest income reached a record $89 million with strong contributions from capital markets and wealth management, as well as solid SBA revenue. Through our efforts of enhancing our product suite and expanding our services, our non-interest income now comprises 28% of our total revenue. After launching our new website at the beginning of last year, our website engagement has increased 13% year-to-date compared to the same period in 2020, which included increased usage due to COVID and PPP origination. And since then, 61% of all applications came through our digital channels, and those -- and of those applications, approximately 46% were submitted outside of normal business hours or on the weekend. The chatbot will identify policies and procedures and provide recommended scripting to address the Top 100 frequently asked questions. Additionally, improving trends across the broader economy and government stimulus have further contributed to these favorable results, including deferrals, which have reached an immaterial level of only 0.2% of total loans. The level of delinquency, excluding PPP balances, ended September at a very solid 71 basis points, a 9 bp improvement on a linked-quarter basis, reflecting a notable improvement in non-accruals within the commercial book. The level of NPLs and OREO improved to end the quarter at 49 basis points, representing a 9 basis point reduction from the prior quarter's ex-PPP level. The reduction in NPLs during the quarter totaled $18 million and when compared to the year-ago period when NPLs had reached their peak, declined by $68 million, representing a solid 38% year-over-year reduction. Net charge-offs for the quarter were very low at $1.6 million or 3 basis points annualized, while year-to-date net charge-offs were solid at 7 basis points on an annualized basis. We recognized a $1.8 million net benefit in the provision during the quarter following these improvements in our credit quality position. This resulted in a GAAP reserve position that was down 1 basis point to stand at 1.41% with the ex-PPP reserve decreasing 6 bps to stand at 1.45%. Our NPL coverage position further improved ending September at a very solid level of 317% following the noted reductions in NPLs during the quarter. Our total ending reserve position inclusive of acquired unamortized discounts totaled 1.56%. Our continued strategic focus on diversified fee income contribution drove non-interest income to a record $88.9 million, up $9.1 million or 11% linked-quarter, leading to record pre-provision net revenue of $138 million on an operating basis and a return on tangible common equity reaching nearly 17%. Our tangible book value per share reached $8.42, an increase of $0.22 or 2.6% on a linked-quarter basis. Third quarter earnings per share increased to $0.34, up $0.03 over the prior quarter and $0.09 from the year ago quarter. On a linked-quarter basis, total revenue reached a record of $321 million, an increase of $13.6 million or 4.4% and drove net income available to common stockholders to a record $109.5 million, an increase of $10 million or 10.2%. When excluding PPP, which is more reflective of the underlying loan growth, period-end total loans increased $463 million or 7.8% annualized on a linked-quarter basis with commercial loans and leases increasing $289 million or 7.4% annualized and consumer loans increasing $173 million or 8.5% annualized, building on the strong growth generated in the second quarter of this year. As Vince said, this loan growth was across the footprint with production levels 17% higher than last quarter and 45% higher than third quarter of 2020. Reported average loans and leases totaled $24.7 billion with average commercial loans and leases decreasing $942 million, which was entirely due to lower average PPP balances as we saw an acceleration of forgiveness and ended the quarter at $694 million. On the deposit side, average deposits totaled $30.8 billion, an increase of $0.3 billion or 1.1% primarily in non-interest-bearing deposit accounts. Turning to Slide 8, net interest income totaled $232.4 million, an increase of $4.5 million or 2% from the prior quarter. Moving to PPP contribution and purchase accounting accretion, net interest income increased $2.8 million or 1.4%, reflecting an increase in average loans, more favorable funding mix and lower deposit costs. Reported net interest margin increased 2 basis points to 2.72%, reflecting higher PPP contribution of 23 basis points and a 5 basis point benefit from acquired loan discount accretion, which was offset by higher average cash balances that reduced the net interest margin 26 basis points. Excess cash balances grew to $3.7 billion at quarter end, a 45% increase from June 30. When excluding these higher excess cash balances, acquired loan discount accretion and PPP impact, net interest margin declined 2 basis points. Now let's look at non-interest income and expense on Slides 9 and 10. Record non-interest income totaled $88.9 million, increasing $9.1 million or 11.4% from the prior quarter with broad contributions from each of our fee-based businesses. Capital markets income increased $5.5 million, reflecting very strong swap activity with solid contributions from commercial lending activity as well as contributions from loan syndication, debt capital markets and international banking. Service charges increased $2 million, reflecting seasonally higher customer activity volumes. SBA volumes and average transaction sizes continue to be strong with $2 million in premium income included in other non-interest income. Also included in other non-interest income was a $2.2 million recovery on a previously written off other assets. Reported non-interest expense increased $1.7 million or 0.9% to $184.2 million this quarter. Excluding non-operating items, non-interest expense increased $3.4 million or 1.9%. On an operating basis, the increase was driven by salaries and employee benefits increasing $2.9 million or 2.8% due to production and performance-related commissions and incentives, consistent with record levels of total revenue, which was driven by diversified strong contributions from our fee-based businesses. Now, let's turn to fourth quarter guidance on Page 12. We expect PPP forgiveness to be $300 million to $500 million. With the PPP loan balances decreasing, we are estimating a range of $10 million to $15 million with a PPP contribution to net interest income compared to the third quarter's contribution of $27 million. Continuing to benefit from our diversified revenue base, we expect non-interest income to be in the high $70 million to $80 million for the fourth quarter. Non-interest expense is expected to be around $180 million on an operating basis, which is subject to normal production-related incentives and commissions as we close out the year. We expect the effective tax rate to be between 19% and 19.5%.

FNB's third quarter earnings per share was $0.34, representing an increase of 10% on a linked-quarter basis and bringing year-to-date earnings per share to $0.94. Third quarter earnings per share increased to $0.34, up $0.03 over the prior quarter and $0.09 from the year ago quarter. On a linked-quarter basis, total revenue reached a record of $321 million, an increase of $13.6 million or 4.4% and drove net income available to common stockholders to a record $109.5 million, an increase of $10 million or 10.2%.

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Our third-quarter performance highlighted the exceptional cash generation capability of our business model as we generated nearly $1.2 billion of cash from operations. This burst of inflation accelerated through the third quarter, and during the quarter, we saw roughly $60 million of labor inflation and about $100 million of inflation in other operating cost categories. Overall, our underlying labor inflation for the third quarter was 8.7%. Our pricing programs delivered core price of 4.6% and collection and disposal yield of 3.5% in the third quarter. Standout performance continues to be the residential line of business with a yield of 5%, while MSW yield improved to 3.5%. But keep in mind, the price escalations on about 40% of our revenue are tied to an index, often based on a look-back over the prior year, so there's a timing lag in adjusting index pricing when costs step up as quickly as they have. And it's important to understand that a portion of the remaining 60% of our business won't get the full 7% to 10% price increases we believe we need to cover rising costs until their next price increase cycle. A customer who has increased 4% in May won't get the full cost recovery price increase until next May. Given the success of these rebuilds and the labor inflation challenges of late, we've accelerated the retooling of the remaining single-stream plants and expect to address 90% of single-stream volume by the 2023-2024 time frame. Of note, our focus on unlocking more plastic from the waste stream drove a 25% increase in plastics we recycle since 2019. Our team continues to execute very well despite a challenging operating environment, producing more than 7% organic revenue growth in collection and disposal business in the third quarter. This growth, combined with continued integration of Advanced Disposal, drove operating EBITDA more than 14% higher. Adjusted operating expenses as a percentage of revenue increased 180 basis points to 62.2% in the third quarter as we experienced pressure from inflationary costs, supply chain constraints and stronger-than-expected volume growth. In the residential line of business, we continue to work through the last 40% of our routes, including those from ADS that are not fully automated while continuing to be very selective in the business we are willing to take on, as evidenced by our yield and volume results in the third quarter and the last few years. Turning to our strong revenue results, third-quarter collection and disposal volume grew by 3.8%, which outpaced our expectations. We continue to see strong volume, driven by economic reopening with commercial volume up 4.6% and special waste volume up by 16.6%, and we see runway for continued solid performance in the fourth quarter. Service increases outpaced service decreases by more than twofold for the second consecutive quarter and churn was 8.7%. Year to date, net new business for small and medium business customers is up more than 10%. We've combined around 70% of the acquired operations into our billing and operational systems, and we remain on track to migrate virtually all the ADS customers by the end of the year. We've achieved nearly $26 million in annual run rate synergies during the third quarter, bringing the year-to-date total to $60 million. Combined with the $15 million of annual run rate synergies realized in the fourth quarter of 2020, we're on track to reach $100 million by the end of the year. And we continue to forecast another $50 million to be captured in 2022 and 2023 from a combination of cost and capital savings. Total company revenue growth is now expected to be between 17% and 17.5%, with yield and volume in our collection and disposal business of about 6.5%. We're confirming our most recent 2021 adjusted operating EBITDA guidance of between $5 billion and $5.1 billion, which is an increase from the prior year of about 17% at the midpoint and almost 5% higher than our initial outlook for the year. Third-quarter SG&A was 9.7% of revenue, a 40-basis-point improvement over 2020. Included in our results is about $16 million of increased digital investments as we advanced technology that will benefit customer engagement and lower our cost to serve over the long term. Third-quarter net cash provided by operating activities was $1.18 billion, an increase of 15%. In the third quarter, capital spending was $464 million, bringing capital expenditures in the first nine months of the year to $1.13 billion. Investments in recycling technology and equipment at our MRFs are expected to be about $200 million for the year. While we continue to target full-year capital spending at the low end of our $1.78 billion to $1.88 billion guidance range, we could see 2021 coming in below targeted levels, with some of our spending pushed into 2022, primarily due to supply chain constraints. We generated $773 million of free cash flow in the third quarter. And through September, our business generated free cash flow of $2.29 billion, seeing us well on our way to our full-year targeted free cash flow of $2.5 billion to $2.6 billion. We've returned more than $1.7 billion to our shareholders through the first nine months, paying $730 million in dividends and repurchasing $1 billion of our stock. We continue to expect to repurchase up to our full authorization of $1.35 billion in 2021. Our leverage ratio at the end of the quarter was 2.71 times as the strength of our business performance and the successful integration of the acquired ADS business drove the achievement of our targeted leverage ratio ahead of plan.

Total company revenue growth is now expected to be between 17% and 17.5%, with yield and volume in our collection and disposal business of about 6.5%. We're confirming our most recent 2021 adjusted operating EBITDA guidance of between $5 billion and $5.1 billion, which is an increase from the prior year of about 17% at the midpoint and almost 5% higher than our initial outlook for the year.

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Earlier today, we reported fourth-quarter revenue of $10.5 billion, net earnings of $1 billion, and earnings per diluted share of $3.49. This is, in most respects, a very solid quarter, even though we missed consensus by $0.05. It is quite remarkable that we came within $0.02 of the very strong pre-pandemic fourth-quarter 2019. On a sequential basis, suffice it to say that revenue is up 11.1%, operating earnings are up 20.6%, net earnings are up 20.1% and earnings per share are up 20.3%. For the full year, we had revenue of $37.9 billion, down from 3.6% from the prior year, net earnings of $3.17 billion, and earnings per fully diluted shares of $11, once again, modestly below consensus. Our business was strengthened by significant growth in the backlog to a year-end record high of $89.5 billion. The same is true of total estimated contract value at $134.7 billion. The total company book-to-bill was 1.1 to 1 for the year, led by the particularly strong order performance of Electric Boat. Our cash performance for the quarter and the year was stronger than expected with a conversion rate of 91% of net income for the year. Aerospace revenue of $2.4 billion is up 23.3% over the third quarter on the strength of the delivery of 40 aircraft, 34 of which were large cabin. For the full year, revenue of $8.08 billion is off 17.6% from the prior year. Nevertheless, operating earnings are still over $1 billion, far away the industry leader. Fourth-quarter operating earnings of $401 million is 41.7% better than the third quarter on the strength of higher revenue and a 220-basis-point improvement in operating margin. Furthermore, margins increased on a sequential basis throughout the year, ending at 16.5% in the fourth quarter. At midyear last year, we told you to expect revenue of about $8.4 billion with earnings of $1.13 billion. We finished the year with revenue of $8.1 billion and earnings of $1.08 billion. The entire shortfall is attributable to 127 deliveries versus our expectation of 130. All in all, still within the 125 to 130 deliveries we gave you right after the initial shock to the economy caused by the pandemic became manifest. The book-to-bill at Aerospace in the fourth quarter was 0.96 to 1, dollar-denominated. For the year, the book-to-bill was 0.88 to 1. We had 92 units of this family of aircraft in service at year-end. At the end of this year, we had 436 G650 in service, an average of 54 a year. The 650 continues to be in demand, but not at that level. Finally, on the new product development front, all five G700 flight-test aircraft are flying and have over 1,000 hours of test flight. Revenue in the quarter of $1.96 billion is essentially the same as the year-ago quarter. Operating earnings of $309 million are $25 million or 8.8% ahead of the final quarter of 2019 on the strength of 140 basis point improvement in operating margin to 15.8%. For the full year, revenue of $7.2 billion is up $216 million, a 3.1% increase after a 12.3% growth in 2019 despite a revenue decline at ELS, driven by COVID shutdowns in Spain earlier in 2020. Operating earnings of $1.04 billion are up $45 million, a 4.5% increase. The fourth quarter had some nice order activity, including a contract for Abrams Version 3 with a ceiling of $4.3 billion and additional Stryker SHORAD orders with the ceiling of up to $1.2 billion. Outside the U.S., we are beginning to see increased demand as our NATO allies start to emerge from COVID-constrained activity, including over $200 million of Canadian ammunition orders in the quarter. Marine fourth-quarter revenue of $2.9 billion is up $292 million, a compelling 11.4% increase over the year-ago quarter. Operating earnings of $247 million are up $48 million against a good fourth quarter in 2019. Revenue was up $452 million, and earnings are up $24 million or 10.8%. For the full year, revenue was almost $10 billion, up $796 million or 8.7%. Operating earnings for the year of $854 million are up by $69 million or 8.8%. In our midyear guidance to you, we anticipated revenue of about $9.6 billion and operating earnings of $845 million. For the quarter, Technologies had revenue of $3.23 billion, off less than 1% sequentially. Operating earnings of $352 million are up $38 million or 12.1% on a 120-basis-point improvement in margins. As you would expect, given the environment, revenue for the first full year is off $711 million or 5.3%, and earnings are off $100 million or 7.6%. Revenue came in at $350 million, below our guidance, $12.65 billion versus $13 billion, but margins, particularly at GDIT, were better, leading our earnings forecast to be on target. From a margin perspective, GDIT was at 7.9%, up 40 basis points sequentially. Mission Systems, at 16.2%, was up 290 basis points over the last quarter. For the full year, the group's free cash flow exceeded 150% of full-year imputed net earnings, the strongest performance within General Dynamics. These wins drove GDIT's total estimated contract value up $2 billion or 11% as compared to both the third quarter and year-end 2019. That resulted in free cash flow for the year of $2.9 billion, a cash conversion rate of 91%, nicely ahead of our anticipated 80% to 85% of net income. To put this in context, our cash from operations for the year of $3.9 billion was less than $20 million shy of the highest annual operating cash flow we've ever had, notwithstanding the impact of COVID on our operations in 2020. This was the result of outstanding performance across the business to close out the year, most notably in the Aerospace group, which began to draw down its inventory that we've been discussing for some time, and the Technologies group, which continues to generate superb cash flows, as Phebe mentioned, in this case, in excess of 150% of imputed net income for the year. As part of that agreement, we received two payments of $500 million each last year, and we received the next progress payment earlier this month in accordance with the revised schedule. To that point, we had capital expenditures of $345 million in the fourth quarter for a full-year total of nearly $1 billion or 2.5% of sales. You may recall, we had expected our capex to peak in 2020 at roughly 3% of sales due to these shipyard investments. As you might expect, given the impact of the pandemic, we've managed the timing of this capex spend prudently, and the result is three years, '19, '20, and '21, at roughly 2.5% of sales. We then expect to trend back down and return to the more typical 2% range by 2023, consistent with our previous expectations. The net result is that we expect cash performance to continue to improve in 2021 to the 95% to 100% conversion range with year-over-year growth in free cash flow in 2021 and beyond. We ended the year with a cash balance of just over $2.8 billion and a net debt position of approximately $10.2 billion, reflecting a $1.7 billion reduction in the fourth quarter. Our net interest expense in the fourth quarter was $120 million, bringing interest expense for the full year to $477 million. That compares to $110 million and $460 million in the comparable 2019 periods. Our next scheduled debt maturities are for $2.5 billion in the second quarter and $500 million in the third quarter of this year. But overall, we expect interest expense to drop to approximately $420 million in 2021. We also paid $315 million in dividends in the fourth quarter, bringing the full year to $1.2 billion. And we repurchased 700,000 shares of stock in the quarter, bringing us to just over 4 million shares for the year for $600 million or $148 per share. With respect to our pension plans, we contributed $480 million in 2020, and we expect that to decrease to approximately $360 million in 2021, the majority of that in the second half. We had a 15.4% effective tax rate in the fourth quarter, resulting in a full-year rate of 15.3%, consistent with our previous guidance. Looking ahead to 2021, we expect a full-year effective tax rate of around 16%. In particular, this reduces our corporate operating earnings, which we expect to be a negative $85 million in 2021, and increases our other income, which is below the line, which we expect to be approximately $90 million in 2021. As an indication of the steady improvement since the peak of the disruption from the pandemic, Aerospace book-to-bill returned to 1 times in the quarter, consistent with Phebe's remarks on what we're seeing in terms of Gulfstream demand. Marine Systems had an outstanding quarter with a book-to-bill of over 4 times due to the exercise of the $9.5 billion option for the Columbia construction contract, providing opportunity for further long-term top- and bottom-line growth for Marine Systems. They had a very nice quarter with some notable awards, including the final resolution on the DEOS program with a potential value of $4.4 billion; the EMITS contract in support of the U.S. Army in Europe; the State Department's GSS 2.0 contract with a potential value of $3.3 billion; and a contract with the Air Force to develop a digital engineering environment. So the headline numbers you see in the firm backlog belie the outstanding performance in the quarter, as reflected in the total estimated contract value for the group of just over $41 billion. In Aerospace, we expect revenue to be about $8 billion, essentially flat with 2020. Operating margins will be about 12.5%, leading to operating earnings of $1 billion, maybe slightly more. You will recall that I told you last quarter, we will deliver 13 fewer G550s as that airplane is no longer in production. This leaves us with 13 fewer aircraft, not including the three slips from 2020. So all up, 10 fewer aircraft. This reduction in revenue will be made up by a roughly $500 million increase in services across Jet Aviation and Gulfstream at about 10% lower operating margin. In Combat Systems, we expect revenue of about $7.3 billion, an increase of approximately $100 million over 2020. We expect the operating margin to be about 14.5% and operating earnings to exceed last year by $20 million or 2%. The Marine group is expected to have revenue of approximately $10.3 billion, an increase of over $300 million. Operating margin in 2021 is anticipated to be around 8.3%, driven in large part by increased work on the first two cost-plus Columbia submarines, which have conservative initial booking rates. We expect revenue in the Technologies group of $13.2 billion, $580 million more than 2020. This is a growth of 4.5% with GDIT growing at a rate of 7.1%. Mission Systems will be essentially flat with organic growth of 3%, offset by the SATCOM divestiture. We expect earnings of $1.25 billion, about $50 million more than 2020. This implies an overall margin of 9.5% with GDIT returning to 7% or more. So for 2021, companywide, we expect to see approximately $39 billion of revenue, up over $1 billion from 2020, and operating margin at 10.5%. This all rolls up to a forecast range of $11 to $11.05 per fully diluted share. On a quarterly basis, we expect earnings per share to play out much like it has in prior years with Q1 about $2.20 and progressively stronger quarters thereafter. It assumes a 16% tax provision and assumes we buy only enough shares to hold the share count steady with year-end figures so as to avoid dilution from option exercises. Our strong cash flow in 2020 and our anticipation of a 95% to 100% conversion rate in 2021 leaves us with the ability to engage in a share repurchase program this year to enhance the earnings per share figures I have just given you.

Earlier today, we reported fourth-quarter revenue of $10.5 billion, net earnings of $1 billion, and earnings per diluted share of $3.49. For the full year, revenue of $7.2 billion is up $216 million, a 3.1% increase after a 12.3% growth in 2019 despite a revenue decline at ELS, driven by COVID shutdowns in Spain earlier in 2020.

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In Q1, total reported sales declined 7%. Organic sales were down 10% versus prior year. Intelligent devices organic sales declined 8%. Software and Control organic sales declined 6%. Lifecycle services' organic sales decline of 16% was led by continued weakness in oil & gas. We did see a 25% sequential uptick in Lifecycle services orders in the quarter, which will drive sequential sales improvement through the balance of the year. IS/CS built backlog by about 30% versus prior year and we expect IS/CS to have a great year overall, growing double-digits in fiscal '21 with organic sales exceeding $500 million. Lifecycle services book-to-bill reached a record of 1.18 reflecting a significant improvement both sequentially and year-over-year. Segment operating margin performance of 20% in the quarter was roughly flat with last year on lower sales, a testament to our increasing business resilience. Adjusted earnings per share grew 11% versus prior year, including the legal settlement gain. Our Discrete Market segment sales declined by approximately 5% however, we saw strong broad order momentum in the quarter particularly in North America that should benefit sales performance for the remainder of the year. Automotive sales declined approximately 10% versus prior year with mid-single digits growth in EMEA offset by tough comparisons in other regions. We also won at a European Tier 1 OEM, which shows our independent cart technology for the precision motion control necessary to build new electric vehicles. Another highlight within discrete was our performance in e-commerce, with sales growing approximately 40% versus prior year. This segment grew by low-single digits and accounted for 45% of revenue this quarter. Life sciences grew about 10% in Q1 well above our expectation for the quarter led by strong broad-based demand in North America. Thermo Fisher is an important part of the vaccine ecosystem and we were very proud this quarter to be awarded a significant multi-year enterprise software order to supply software and professional services to enable their Pharma 4.0 initiative and drive their COVID readiness and response. For every one pallet of vaccines being shipped, 20 to 30 additional pallets of vaccine accessories are required. Process markets were down approximately 25% and weaker than we expected led by larger declines in oil & gas. North America organic sales declined by 11% versus the prior year primarily due to sales declines in oil & gas and automotive. EMEA sales declined 8% led by oil & gas. Sales in the Asia Pacific region declined 7% largely due to declines in process industries that were partially offset by growth in mass transit and semiconductor. Our new reported sales outlook assumes 10% year-over-year growth at the midpoint including 6% organic growth. Our new adjusted earnings per share target of $8.90 at the midpoint of the range represents 13% growth over the prior year. First quarter reported sales were down 7.1% year-over-year. Organic sales were down 9.7%. Acquisitions contributed 1.8 points of growth and currency translation increased sales by 0.8 points. Segment operating margin was 19.8%, slightly below Q1 of last year. Corporate and other expense of $28 million was down about $5 million compared to last year. The adjusted effective tax rate for the first quarter was 15.4% compared to 8.3% last year. First quarter adjusted earnings per share was $2.38. As Blake mentioned earlier, this result includes $0.45 related to a favorable legal settlement. Adjusted earnings per share excluding the legal settlement was $1.93 identical to last quarter and better than we expected. We're pleased with this result since compared to last quarter we were unable to overcome a $0.30 headwind from the reinstatement of incentive compensation and the reversal of temporary cost actions as of the end of November. Free cash flow was $319 million in the quarter including the $70 million legal settlement. Free cash flow conversion was 115% of adjusted income. We repurchased 356,000 shares in the quarter at a cost of about $88 million. This is in line with our full-year placeholder of about $350 million. At December 31, $766 million remained available under our repurchase authorization. The Intelligent Devices segment had an organic sales decline of 7.9% in the quarter. Segment margin was 19.4%, 130 basis points lower than last year, mainly due to lower sales partially offset by temporary and structural cost savings. Software and Control segment organic sales declined 6.2% in the quarter. Acquisitions contributed 2.7% to growth and segment margin was 30.2%, which was 80 basis points lower than last year's strong margin performance mainly due to lower sales, partially offset by temporary and structural cost savings. Organic sales of the Lifecycle Services segment declined 16.3% year-over-year as the recovery in this segment's offerings tends to lag our products businesses. Acquisitions contributed 3.9% to growth and operating margin for this segment increased 50 basis points to 8.9% versus 8.4% a year ago despite lower sales. First quarter book-to-bill performance for the Lifecycle Services segment was 1.18, a strong start to the year. Starting on the left, core performance had a negative impact of about $0.25 driven by lower organic sales. Temporary cost actions partially offset the sales impact by $0.20. These were the salary reductions and 401(k) match suspension that we implemented in Q3 of fiscal 2020, which remained in effect through the end of November 2020. Incentive compensation was a year-over-year headwind of about $0.10. Tax was a headwind of about $0.10 primarily due to the Sensia-related tax benefit recorded last year and other discrete items. Acquisitions contributed about $0.05. Finally, as mentioned earlier, the legal settlement contributed $0.45 to adjusted EPS. A strong order performance resulted in record total company backlog growing over 20% year-over-year and double-digits sequentially. We are increasing our organic sales growth outlook by 1 point. The new range is 4.5% to 7.5% with a midpoint of 6%. Given the weaker U.S. dollar we now expect currency translation to contribute about 2.5% to growth. We expect acquisitions to contribute about 1.5%. In total, the midpoint of our reported sales guidance range is 10%. We have also updated the adjusted earnings per share guidance range to $8.70 to $9.10. I'll review the bridge from the prior guidance midpoint and the new $8.90 midpoint on the next slide. Segment operating margin is now expected to be about 19.5%. Our adjusted effective tax rate is expected to be about 14%, the same as prior guidance. As mentioned last quarter, this includes a 300 basis point benefit related to discrete items, which we expect to realize late in the fiscal year. We continue to project free cash flow conversion of about 100% of adjusted income. Corporate and other expense is expected to be between $105 million and $110 million. Purchase accounting amortization expense for the full year is expected to be about $50 million. Net interest expense for fiscal 2021 is still expected to be between $90 million and $95 million. Finally, we're still assuming average diluted shares outstanding of about 117 million shares. Currency is projected to add about $0.05 compared to prior guidance. Next, given the increase in guidance, there is about a $0.10 impact from higher bonus expense. Finally, there is the $0.45 contribution from the Q1 legal settlement, partially offset by about $0.35 for the incremental investments and the impact of the Fiix acquisition. The new midpoint of the guidance range is $8.90. As a reminder, as we mentioned on the last earnings call, Q2 will have the largest year-over-year headwind from the reinstatement of the bonus in the range of $50 million.

First quarter reported sales were down 7.1% year-over-year. First quarter adjusted earnings per share was $2.38. The new range is 4.5% to 7.5% with a midpoint of 6%. We have also updated the adjusted earnings per share guidance range to $8.70 to $9.10.

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In Q2, our global team delivered outstanding results across each of our key financial metrics, and I'd note particular strength across the top and bottom line with 11% organic revenue growth, driven by mid-single-digit or greater organic revenue growth from every solution line, highlighted the particular strength in commercial risk at 14%, which translated into 17% adjusted earnings per share growth in Q2 and 13% free cash flow growth for the first half. Our 8% organic revenue growth for the first half reflects mid-single-digit or greater organic revenue growth from four of our five solution lines. Second, the events of the past 16 months have honed the power of Aon United and our ability to work together to deliver new sources of value to clients. Our colleagues are delivering client retention and net new business generation across all solution lines, driving 8% organic revenue growth over the first half and 11% organic revenue growth this quarter, our strongest performance in almost two decades. And our Aon Business Services operating platform is digitizing our firm, improving the client experience and enabling efficiency, as demonstrated by operating margin expansion and 13% free cash flow growth in the first half. We delivered continued progress for both the quarter and year-to-date, including an impressive 11% organic revenue growth in Q2. As I further reflect on our performance for the first half of the year, as Greg noted, organic revenue growth was 11% in the second quarter and 8% year-to-date. I would also note the total reported revenue was up 16% in Q2 and 12% year-to-date, including the favorable impact from changes in FX rates, driven by a weaker U.S. dollar versus most currencies. Our strong revenue growth and ongoing operational discipline contributed to adjusted operating income growth of 11% in Q2 and 14% through the first half of the year. As we communicated in Q1, the timing of expenses is changing year-over-year such that $135 million of expenses moved into Q2 from Q4. The $135 million is approximately 1.5% of our total 2020 expense base. In Q2, this repatterning negatively impacted margins by approximately 470 basis points, resulting in Q2 operating margin contraction of 100 basis points. Excluding this impact, margins would have expanded by 370 basis points in Q2 and 250 basis points for the first half of 2021. As we said before, we expected a further $65 million to move from Q4 into Q3 for a total of $200 million of expenses moving out of Q4. Collectively, the headwind from expense repatterning and tailwind from slower investment as compared to growth were the main factors driving 100 basis points of margin contraction in Q2 and the 40 basis points of margin expansion in the first half of 2021. We've translated strong operating income growth into adjusted earnings per share growth of 17% in Q2 and 16% year-to-date. As noted in our earnings material, FX translation was a favorable impact of approximately $0.04 in Q2 and $0.22 year-to-date. If currency to remain stable at today's rates, we'd expect a $0.02 per share favorable impact to Q3 and $0.01 per share favorable impact in Q4. In accordance with the business combination agreement, we have paid the $1 billion termination fee to Willis Towers Watson. As part of the termination, we also expect to incur approximately $350 million to $400 million of additional charge in Q3 related to transaction costs and compensation expenses as well as a small number of actions related to further steps on our Aon United operating model. Given the outstanding work our colleagues have done over the last past 16 months, we've taken steps internally to ensure our colleagues share in the growth potential of the firm going forward, and this includes those who are previously offered retention bonuses in connection with the combination. Free cash flow increased 13% year-to-date to $1.3 billion, driven primarily by strong operating income growth and a decline in structural uses of cash. We continue to expect to drive free cash flow growth over the long term, building on our long-term track record of 14% CAGR over the last 10 years, based on operating income growth, working capital improvements and reduced structural use of cash. In the second quarter, we repurchased approximately 1.1 million shares for approximately $240 million. Our financial profile has improved over the past 18 months. And considering our June 30 balance sheet and the payment of the termination fee, we estimate we have $1.5 billion of additional debt capacity for discretionary use in the second half as we return to historical leverage ratios while maintaining our current investment-grade credit rating.

We've translated strong operating income growth into adjusted earnings per share growth of 17% in Q2 and 16% year-to-date.

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By the numbers, we reported first quarter 2021 adjusted earnings of $2 billion or $2.20 per share, up 39% from $1.58 a year ago. Net income for the quarter was $290 million, down from $4.4 billion a year ago, primarily due to losses on derivatives that protect our balance sheet from declines in equity markets and interest rates. Regarding variable investment income, the key driver of gains in the first quarter was our private equity portfolio, which delivered returns of 13.3%. Adjusted earnings were down 70% year-over-year on elevated COVID-19 life claims. In the US, overall COVID-19-related deaths were 40% higher in the first quarter of 2021, than they were in the fourth quarter of 2020. For MetLife, our Group Life mortality ratio was 106.3%, well above the high end of our target range of 85% to 90% with approximately 17 percentage points attributable to COVID -19 claims. The top line performance of the Group Benefits business was strong with sales up 46% year-over-year. Adjusted PFO growth was also solid at 16% with the addition of Versant Health being a large contributor. In retirement and Income Solutions or RIS, adjusted earnings were up 92% year-over-year, driven by higher VII. Adjusted earnings were up 70% year-over-year on a constant currency basis, driven by higher VII. Sales in the region were up 12% on a constant currency basis, even with the COVID resurgence in certain markets. In Latin America, adjusted earnings were down 57% year-over-year on a constant currency basis, primarily due to the pandemic. COVID-related claims in the quarter totaled approximately $150 million, mainly in Mexico. In EMEA, adjusted earnings of $71 million were down 11% on a constant currency basis on higher COVID-related claims as well as higher expenses compared to the favorable prior-year quarter. Sales were up 4% on a constant currency basis with strong momentum in the UK employee benefits space. Turning to cash and capital management, MetLife ended the first quarter with cash at the holding company of $3.8 billion near the top end of our $3 billion to $4 billion target buffer. Our two-year average free cash flow ratio remains within our guidance range of 65% to 75%. Currently, our cash balances are much higher following the receipt of $3.94 billion of proceeds on the sale of our US P&C business. During the quarter, we were pleased to return $1.4 billion of capital to shareholders, $1 billion in share repurchases, and approximately $400 million in common stock dividends. So far in Q2, we have bought back an additional $210 million of common shares, and we have roughly $1.6 billion remaining under our current repurchase authorization. Last week, our Board of Directors approved a second quarter 2021 common stock dividend of $0.48 per share, up 4.3% from the first quarter. Over the last decade, we have increased our common dividend at a 10% compound annual growth rate. In Japan, for example, 95% of our policy submissions are now done digitally. Starting on page 3, we provide a comparison of net income to adjusted earnings in the first quarter. Net income in the quarter was $290 million or approximately $1.7 billion lower than adjusted earnings. On page 4, you can see the year-over-year comparison of adjusted earnings by segment. Adjusted earnings per share benefited from exceptionally strong returns in our private equity portfolio and were up 39% and 38% on a constant currency basis. Moving to the businesses, starting with the US group benefits, adjusted earnings were down 70% year-over-year, largely driven by unfavorable group life mortality due to elevated COVID-19-related life claims. Group Benefits sales were up 45% year-over-year primarily due to higher jumbo case activity. Adjusted PFOs were $5.6 billion, up 16% year-over-year due to solid volume growth across most products, the addition of Versant Health and roughly five percentage points related to higher premiums from participating contracts, which can fluctuate with claims experience. Retirement and Income Solutions or RIS adjusted earnings were up 92% year-over-year. RIS investment spreads were 234 basis points up 120 basis points year-over-year primarily due to higher variable investment income. Spreads excluding VII were 88 basis points, up 5 basis points year-over-year primarily due to the decline in LIBOR rates. RIS liability exposures including UK longevity reinsurance grew 12% year-over-year due to strong volume growth across the product portfolio, as well as separate account investment performance. The notional balance stands at $8.8 billion at March 31, up nearly $5 billion from year end 2020. The sale of the Auto and Home Business to Farmers Insurance closed on April 7, and we expect to record an after-tax gain of approximately $1 billion in 2Q 2021. Moving to Asia, adjusted earnings were up 78% and 70% on a constant currency basis, primarily due to higher variable investment income as well as volume growth and favorable underwriting margins. Asia's solid volume growth was driven by higher general account assets under management on an amortized cost basis, which were up 6% and 4% on a constant currency basis. Asia sales were up 12% year-over-year on a constant currency basis with growth across most markets. Latin America, adjusted earnings were down 58% and 57% on a constant currency basis, primarily driven by unfavorable underwriting, partially offset by the improvement in equity markets. Elevated COVID-19-related claims primarily in Mexico impacted Latin America's adjusted earnings by approximately $150 million after tax. Latin America adjusted PFOs were down 6% year-over-year on a constant currency basis due to lower single premium immediate annuity sales in Chile. EMEA adjusted earnings were down 9% and 11% on a constant currency basis, primarily driven by higher COVID-19-related claims as well as higher expenses compared to the favorable prior-year quarter. EMEA adjusted PFOs were down 5% on a constant currency basis, but sales were up 4% on a constant currency basis due to strong growth in UK employee benefits. MetLife Holdings adjusted earnings were up 123%. The life interest adjusted benefit ratio was 54.8%, higher than the prior year quarter of 51% and at the top end of our annual target range of 50% to 55% due to elevated COVID-19 mortality. Corporate and other adjusted loss was $171 million. This result is consistent with our 2021 adjusted loss guidance range of $650 million to $750 million. The Company's effective tax rate on adjusted earnings in the quarter was 20.8% and within our 2021 guidance range of 20% to 22%. Now, I will provide more detail on Group Benefits 1Q 2021 underwriting performance on page 5. There were approximately 200,000 COVID-19-related deaths in the US in the first quarter, the highest single quarter since the pandemic began and up nearly 40% versus the fourth quarter of 2020. In addition to the higher number of claims, there were more deaths at younger ages below 65, which resulted in increased claims severity. Apart from COVID-19, the number of life insurance claims of greater than $2 million nearly doubled versus a typical quarter. The Group Life mortality ratio was 106.3% in the first quarter, which included roughly 17 percentage points related to COVID-19 life claims. This reduced Group Benefits adjusted earnings by approximately $280 million after tax. For group non-medical health, the interest adjusted benefit ratio was 71.1% in the first quarter with favorable experience across most products. The 1Q 2021 ratio was below the prior year quarter of 71.7% and at the low end of our annual target range of 70% to 75%. Now let's turn to VII in the quarter on page 6. This chart reflects our pre-tax variable investment income over the last five quarters, including approximately $1.4 billion in the first quarter of 2021. This very strong result was mostly attributable to the private equity portfolio, which had a 13.3% return in the quarter. While all private equity classes performed well in the quarter, our venture capital funds, which account for roughly 20% of our PE account balance of $10.3 billion were the strongest performer across subsectors with roughly 25% quarterly return due to a broad increase in tech company valuations. On page 7, first quarter VII of $1.1 billion post-tax is shown by segment. As noted previously, RIS, MetLife Holdings and Asia generally accounted for approximately 90% or more of the total VII and are split roughly one-third each, although it can vary from quarter to quarter. Turning to page 8, this chart shows our direct expense ratio over the prior five quarters and full year 2020 including 11% in the first quarter of 2021. Now, I will discuss our cash and capital position on page 9. Cash and liquid assets at the holding companies were approximately $3.8 billion at March 31, which is down from $4.5 billion at December 31, but well within our target cash buffer of $3 billion to $4 billion. The sequential decrease in cash at the holding companies was primarily due to the net effects of subsidiary dividends, payment of our common stock dividend, share repurchases of approximately $1 billion in the first quarter as well as holding company expenses and other cash flows. For our US companies, our combined NAIC RBC ratio was 392% at year end 2020 and comfortably above our 360% target. excluding our property and casualty business, preliminary first quarter 2021 statutory operating earnings were approximately $1.5 billion while statutory net income was approximately $570 million. Statutory operating earnings increased by roughly $2.3 billion year-over-year driven by lower VA rider reserves and increase in interest margins, higher net investment income, and lower operating expenses. Statutory net income excluding our P&C business increased by roughly $430 million year-over-year, driven by higher operating earnings, partially offset by an increase in after tax derivative losses. We estimate that our total US statutory adjusted capital excluding P&C was approximately $16.7 billion as of March 31, down 2% compared to December 31. Finally, the Japan solvency margin ratio was 967% as of December 31, which is the latest public data.

By the numbers, we reported first quarter 2021 adjusted earnings of $2 billion or $2.20 per share, up 39% from $1.58 a year ago. Cash and liquid assets at the holding companies were approximately $3.8 billion at March 31, which is down from $4.5 billion at December 31, but well within our target cash buffer of $3 billion to $4 billion.

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Revenue for the first quarter grew 24% on a reported basis and 21% at constant currency was $209 million above the high end of our guidance range, but about half of this beat came from strong operational performance and half was from higher pass-throughs. First quarter adjusted EBITDA grew 32%, reflecting our revenue growth and productivity measures. The $69 million beat above the high end of our guidance range was entirely due to the stronger organic revenue performance. First quarter adjusted diluted earnings per share of $2.18 grew 45%. During the quarter, a top 10 pharma client deployed our next best action solution in 14 countries. We added another 10 new clients this quarter and now have 150 clients deploying about 70,000 users. To-date, we've been awarded over 125 studies with over 300,000 patients enrolled and over 4 million surveys completed. In the first quarter, we achieved a contracted net book-to-bill ratio of 1.41, including pass-throughs and 1.41 excluding pass-throughs. At March 31st, our LTM contracted book-to-bill ratio was 1.52 including pass-throughs and 1.45 excluding pass-throughs. Our contracted backlog in R&DS including pass-throughs grew 18.3% year-over-year to $23.2 billion at March 31, 2021. As a result, our next 12 months revenue from backlog increased by over $600 million sequentially to $6.5 billion, that's up 31.1% year-over-year. We are working with 5 of the top 10 pharma client and to-date we've recruited almost 170,000 patients using our advanced decentralized trial solutions. First quarter revenue of $3,409 million grew 23.8% on a reported basis. Analytics Solutions revenue for the first quarter was $1,348 million, which was up 20.7% reported and 17.1% at constant currency. R&D Solutions first quarter revenue of $1,868 million improved 29.6% at actual FX rates, and 28.1% at constant currency. Pass-through revenues were a tailwind of 770 basis points to the R&DS revenue growth rate in the quarter. CSMS revenue of $193 million was down 1.5% reported and 4.1% on a constant currency basis. Moving down to P&L, adjusted EBITDA was $744 million for the quarter. Margins expanded 140 basis points despite significant headwinds from higher pass-through revenue and lower margin COVID work. GAAP net income was $212 million and GAAP diluted earnings per share were $1.09. Adjusted net income was $425 million for the first quarter and adjusted diluted earnings per share grew 45.3% between [Technical Issues] $2.18. Backlog was up 18.3% year-over-year to $23.2 billion at March 31. Next 12 months revenue as Ari mentioned from backlog grew significantly and currently stands at $6.5 billion, up 31.1% year-over-year. At March 31, cash and cash equivalents totaled $2.3 billion and debt was $12.2 billion, resulting in net debt of $9.9 billion. Our net leverage ratio at March 31 improved to 3.9 times trailing 12 month adjusted EBITDA, marking the first time since just following the merger that this ratio was below 4 times. And this is particularly noteworthy, you may recall that in 2019, when we gave you our three year guidance, we committed to delever to 4 turns or below exiting 2022. Cash flow from operations was $867 million, capex was $149 million, resulting in free cash flow of $718 million. We repurchased $50 million of our shares in the quarter, which leaves us with $867 million of share repurchase authorization remaining under the program. You'll recall that back on April 1, when we announced the acquisition of Quest 40% interest in our Q Squared joint venture, we raised our 2021 earnings per share guidance by $0.12 to reflect the elimination of Quest minority interest in the joint venture's earnings. We're raising our full-year 2021 revenue guidance, both at the low and high end of that range, resulting in an increase of $625 million at the midpoint of the range. The new revenue guidance is $13,200 million to $13,500 million, which represents year-over-year growth of 16.2% to 18.8%. Now compared to the prior year, FX is expected to be a tailwind of about 150 basis point to full-year revenue growth. We're also raising our full-year profit guidance as a result of stronger revenue outlook, we've increased it, increased adjusted EBITDA guidance at both the low and high end of the range, resulting in an increase of $133 million at the midpoint. Our new full-year guidance is $2,900 million to $2,965 million, which represents year-over-year growth at 21.6% to 24.4%. Moving to EPS, I mentioned Q Squared transaction on April 1, as a result of that, we raised our adjusted diluted earnings per share guidance by $0.12 to a new range of $7.89 to $8.20. We're now raising both the low and the high end of that guidance range, resulting in a new adjusted diluted earnings per share guidance of $8.50 to $8.75 or year-over-year growth of 32.4% to 36.3%. Moving to detail on P&L, interest expense is expected to be approximately $400 million for the year, operational depreciation and amortization is still expected to be somewhat over $400 million and we're continuing to assume an effective tax rate of approximately 20% for the full year. Now let's turn to the second quarter guidance, assuming FX rates remain constant through the end of the quarter, second quarter revenue is expected to be between $3,225 million and $3,300 million, which represents reported growth of 27.9% to 30.9%. Adjusted EBITDA is expected to be between $690 million and $715 million, which represents reported growth of 42.9% to 48%. And finally, adjusted diluted earnings per share is expected to be between $2 and $2.10, up 69.5% to 78%. This included revenue growth of over 20% in both our TAS and R&DS segment. R&DS backlog improved to $23.2 billion, up 18% year-over-year. Next 12 months revenue from that backlog increased to $6.5 billion, up 31% year-over-year. Net leverage improved to 3.9 times trailing 12 month adjusted EBITDA.

First quarter adjusted diluted earnings per share of $2.18 grew 45%. First quarter revenue of $3,409 million grew 23.8% on a reported basis. GAAP net income was $212 million and GAAP diluted earnings per share were $1.09. Adjusted net income was $425 million for the first quarter and adjusted diluted earnings per share grew 45.3% between [Technical Issues] $2.18. The new revenue guidance is $13,200 million to $13,500 million, which represents year-over-year growth of 16.2% to 18.8%. We're now raising both the low and the high end of that guidance range, resulting in a new adjusted diluted earnings per share guidance of $8.50 to $8.75 or year-over-year growth of 32.4% to 36.3%. Now let's turn to the second quarter guidance, assuming FX rates remain constant through the end of the quarter, second quarter revenue is expected to be between $3,225 million and $3,300 million, which represents reported growth of 27.9% to 30.9%. And finally, adjusted diluted earnings per share is expected to be between $2 and $2.10, up 69.5% to 78%.

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We reported net sales of $279.9 million during the third quarter of 2021, which represents an increase of 32%, compared to $212.1 million during the third quarter of 2020. More specifically, we posted net sales growth of 20.8% in our North American Fenestration segment; 19.3% in our North American Cabinet Components segment; and 85.8% in our European Fenestration segment, excluding the foreign exchange impact and despite the challenges presented by flooding in Germany during the quarter. We reported net income of $13.7 million or $0.41 per diluted share for the three months ended July 31, 2021, compared to $10.8 million or $0.33 per diluted share for the three months ended July 31, 2020. The increase from 19% to 25% will not be effective until tax years beginning on or after April 1, 2023. Therefore, in Q3, we remeasured the deferred tax assets and liabilities that will reverse in 2023 at a new tax rate of 25%. So to account for this change, we now estimate our tax rate to be approximately 28% this year. On an adjusted basis, EBITDA for the quarter increased by 18.8% to $32.9 million, compared to $27.7 million during the same period of last year. Cash provided by operating activities was $18.5 million for the three months ended July 31, 2021, compared to $45.1 million for the three months ended July 31, 2020. Free cash flow came in at $12.3 million for the quarter, compared to $40.7 million in Q3 of last year. Despite this pressure on inventory costs, we were still able to both repay $15 million in bank debt and repurchase approximately $1.8 million of our stock during the quarter. Year to date, as of July 31, 2021, cash provided by operating activities was $47.4 million, compared to $47.6 million for the same period last year. Free cash flow year to date as of July 31, 2021, was $31.4 million, compared to $26.9 million during the same period of 2020. Our liquidity position continues to increase, and our leverage ratio of net debt to last 12 months adjusted EBITDA improved to 0.2 times as of July 31, 2021. However, we do expect inflation, labor costs, and supply chain challenges to continue pressuring margins throughout the fourth quarter of this year. In summary, on a consolidated basis, we are reaffirming net sales guidance of approximately $1.04 billion to $1.06 billion, and adjusted EBITDA of $125 million to $130 million in fiscal 2021. Within just 14 days of the storms, the facility was back up and operating at full capacity, and not one customer was shut down because of this weather event. And according to KCMA, the number of average backlog days within the industry has risen to 66.9 days versus prior-year levels of 37.7 days. As a reminder, for the most part, we have contractual pass-throughs for the major raw materials we use in North America but there is often a contractual lag that can generally be anywhere from 30 to 90 days long. But in North America, we are still looking to fill over 400 open positions. On an annual basis, we have raised wages in North America by approximately $5.1 million, which is being covered largely by price increases that have been passed on to our customers. Our North American Fenestration segment generated revenue of $147.8 million, which was approximately 21% higher than prior-year Q3 and compares favorably to Ducker window shipments growth of 14.2% for the calendar quarter ending June 30, 2021. Adjusted EBITDA of $18.3 million in this segment was approximately 2.4% higher than prior-year Q3. For the first nine months of fiscal 2021, this segment had revenue of $422.1 million and adjusted EBITDA of $55.2 million, which represents year-over-year growth of 23.6% and 38.1%, respectively. This also represents adjusted EBITDA margin expansion of approximately 340 basis points when compared to the first nine months of fiscal 2020. Our European Fenestration segment generated revenue of $71.1 million in the third quarter, which is $32.8 million or approximately 86% higher than prior year. Excluding foreign exchange impact, this would equate to an increase of approximately 68%. Adjusted EBITDA of $14.4 million for the quarter was $6.7 million better than prior year. On a year-to-date basis, revenue of $181.9 million and adjusted EBITDA of $38 million resulted in margin expansion of approximately 540 basis points as compared to the first nine months of last year. In our North American cabinet components segment reported net sales of $61.9 million in Q3, which was $10 million or approximately 19% better than prior year. Adjusted EBIT in this segment was $2.5 million, which was $0.6 million less than prior year. Year to date, this timing lag has impacted adjusted EBITDA by $6.4 million. But if we adjust for this inflation, we would have realized approximately 400 basis points of margin expansion in this segment on a year-to-date basis. Unallocated corporate and other costs were $2.2 million for the quarter, which is $1.3 million higher than prior year.

We reported net sales of $279.9 million during the third quarter of 2021, which represents an increase of 32%, compared to $212.1 million during the third quarter of 2020. We reported net income of $13.7 million or $0.41 per diluted share for the three months ended July 31, 2021, compared to $10.8 million or $0.33 per diluted share for the three months ended July 31, 2020. However, we do expect inflation, labor costs, and supply chain challenges to continue pressuring margins throughout the fourth quarter of this year. In summary, on a consolidated basis, we are reaffirming net sales guidance of approximately $1.04 billion to $1.06 billion, and adjusted EBITDA of $125 million to $130 million in fiscal 2021.

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The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. As you may know, we expect our ESG progress plan to drive average annual growth in our asset base of 7%. A good example of our progress is the announcement we made just a week ago about a $400 million investment in the Sapphire Sky Wind Energy Center. We've also made great progress on our plan to build 1,800 megawatts of regulated solar, wind and battery storage. Recall that, back in May, we set near-term goals that are among the most ambitious in the industry: reducing carbon emissions by 60% from our electric generation fleet by 2025 and achieving an 80% reduction by the end of 2030, both from a 2005 baseline. So ahead that we now expect only 8% of our regulated electricity supply to come from coal by the end of 2030. Of course, our long-term goal remains net-zero carbon emissions from our generating fleet by 2050. And our ongoing effort to upgrade our gas delivery networks and introduce renewable natural gas into our system will help us achieve another aggressive goal: net-zero methane emissions by 2030. Wisconsin's unemployment rate, in fact, stands today at 3.9%. And now Milwaukee Tool is redeveloping a vacant downtown office tower to provide space for one,200 new employees over the next five years. The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. As you may know, we expect our ESG progress plan to drive average annual growth in our asset base of 7%. A good example of our progress is the announcement we made just a week ago about a $400 million investment in the Sapphire Sky Wind Energy Center. We've also made great progress on our plan to build 1,800 megawatts of regulated solar, wind and battery storage. Recall that, back in May, we set near-term goals that are among the most ambitious in the industry: reducing carbon emissions by 60% from our electric generation fleet by 2025 and achieving an 80% reduction by the end of 2030, both from a 2005 baseline. So ahead that we now expect only 8% of our regulated electricity supply to come from coal by the end of 2030. Of course, our long-term goal remains net-zero carbon emissions from our generating fleet by 2050. And our ongoing effort to upgrade our gas delivery networks and introduce renewable natural gas into our system will help us achieve another aggressive goal: net-zero methane emissions by 2030. Wisconsin's unemployment rate, in fact, stands today at 3.9%. And now Milwaukee Tool is redeveloping a vacant downtown office tower to provide space for one,200 new employees over the next five years. The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. As you may know, we expect our ESG progress plan to drive average annual growth in our asset base of 7%. A good example of our progress is the announcement we made just a week ago about a $400 million investment in the Sapphire Sky Wind Energy Center. We've also made great progress on our plan to build 1,800 megawatts of regulated solar, wind and battery storage. Recall that, back in May, we set near-term goals that are among the most ambitious in the industry: reducing carbon emissions by 60% from our electric generation fleet by 2025 and achieving an 80% reduction by the end of 2030, both from a 2005 baseline. So ahead that we now expect only 8% of our regulated electricity supply to come from coal by the end of 2030. Of course, our long-term goal remains net-zero carbon emissions from our generating fleet by 2050. And our ongoing effort to upgrade our gas delivery networks and introduce renewable natural gas into our system will help us achieve another aggressive goal: net-zero methane emissions by 2030. Wisconsin's unemployment rate, in fact, stands today at 3.9%. And now Milwaukee Tool is redeveloping a vacant downtown office tower to provide space for one,200 new employees over the next five years. The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. As you may know, we expect our ESG progress plan to drive average annual growth in our asset base of 7%. A good example of our progress is the announcement we made just a week ago about a $400 million investment in the Sapphire Sky Wind Energy Center. We've also made great progress on our plan to build 1,800 megawatts of regulated solar, wind and battery storage. Recall that, back in May, we set near-term goals that are among the most ambitious in the industry: reducing carbon emissions by 60% from our electric generation fleet by 2025 and achieving an 80% reduction by the end of 2030, both from a 2005 baseline. So ahead that we now expect only 8% of our regulated electricity supply to come from coal by the end of 2030. Of course, our long-term goal remains net-zero carbon emissions from our generating fleet by 2050. And our ongoing effort to upgrade our gas delivery networks and introduce renewable natural gas into our system will help us achieve another aggressive goal: net-zero methane emissions by 2030. Wisconsin's unemployment rate, in fact, stands today at 3.9%. And now Milwaukee Tool is redeveloping a vacant downtown office tower to provide space for one,200 new employees over the next five years. At the end of June, our utilities were serving approximately 4,000 more electric customers and 18,000 more natural gas customers compared to a year ago. Retail electric and natural gas sales volumes are shown on a comparative basis, beginning on page 13 of the earnings packet. Overall retail deliveries of electricity, excluding the iron ore mine, were up 7.1% from the second quarter of 2020 and on a weather-normal basis were up 5.8%. For example, small commercial and industrial electric sales were up 10.4% from last year's second quarter and on a weather-normal basis were up 9.2%. Meanwhile, large commercial and industrial sales, excluding the iron ore mine, were up 14.8% from the second quarter of 2020 and on a weather-normal basis were up 13.9%. Natural gas deliveries in Wisconsin were down 4.9%. And on a weather-normal basis, natural gas deliveries in Wisconsin grew by 2.5%. As Gale noted, we have agreed to acquire a 90% ownership interest in the Sapphire Sky Wind Energy Center. The site will consist of 64 wind turbines with a combined capacity of 250 megawatts. We plan to invest $412 million for the 90% ownership interest. This represents approximately $2.3 billion of investment. We expect to invest an additional $1.1 billion in this segment over the remainder of our five-year plan. As you may recall, we own 100 megawatts of this project in Southwest Wisconsin, and Madison Gas and Electric owns the remaining 50 megawatts. The order recommends a $4.2 million rate increase on a 9.67% ROE and 51.6% equity component. This settlement stipulates a 9.85% return on equity and a revenue increase of $9.25 million with an equity layer of 51.5%. Our 2021 second quarter earnings of $0.87 per share increased $0.11 per share compared to the second quarter of 2020. We grew our earnings by $0.09 compared to the second quarter of 2020. First, continued economic recovery from the pandemic drove a $0.06 increase in earnings. Also, rate relief and additional capital investment added $0.04 compared to the second quarter of 2020. Lower day-to-day O&M contributed $0.01, and all other factors resulted in a positive variance of $0.02. These favorable factors were partially offset by $0.04 of higher depreciation and amortization expense. Overall, we added $0.09 quarter-over-quarter from Utility Operations. Earnings decreased $0.02 compared to the second quarter of 2020. While we picked up $0.01 in the current quarter from continued capital investment, this was more than offset by a $0.03 benefit recognized in the second quarter of 2020 related to a FERC order. Recall that this order allowed ATC to increase its ROE from 10.38% to 10.52% retroactive to November 2013. Earnings at our Energy Infrastructure segment improved $0.01 in the second quarter of 2021 compared to the second quarter of 2020. Finally, we saw a $0.03 improvement in the Corporate and Other segment. Lower interest expense contributed $0.02 quarter-over-quarter. We recognized a $0.03 gain from our investment in a fund devoted to clean energy infrastructure and technology development. These positive variances were partially offset by a reduction of $0.01 in rabbi trust performance and $0.01 in taxes and other. In summary, we improved on our second quarter 2020 performance by $0.11. For the full year, we expect our effective income tax rate to be between 13% and 14%. Excluding the benefit of unprotected taxes flowing to customers, we project our 2021 effective tax rate will be between 19% and 20%. Net cash provided by operating activities decreased $153 million. Total capital expenditures and asset acquisitions were $1.1 billion for the first six months of 2021, a $93 million increase as compared with the first six months of 2020. In fact, in June, we refinanced $300 million of debt at Wisconsin Electric, reducing the average coupon of these notes by over 1.2% and extending the maturity to 2028. We are expecting a range of $0.72 to $0.74 per share for the third quarter. As a reminder, we earned $0.84 per share in the third quarter last year. This includes an estimated $0.05 of better-than-normal weather. And as Gale mentioned earlier, we're raising our 2021 earnings guidance to a range of $4.02 to $4.05 per share with an expectation of reaching the top end of the range. In addition to raising our annual guidance, we are reaffirming our projection of long-term earnings growth of 5% to 7% a year with a strong bias toward the upper half of that range. As you may recall, in January, our Board of Directors raised the quarterly dividend by 7.1% to $0.6775 a share. We continue to target a payout ratio of 65% to 70% of earnings.

The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. The new range is $4.02 a share to $4.05 a share, and our expectation is that we will reach the top end of that range. Our 2021 second quarter earnings of $0.87 per share increased $0.11 per share compared to the second quarter of 2020. And as Gale mentioned earlier, we're raising our 2021 earnings guidance to a range of $4.02 to $4.05 per share with an expectation of reaching the top end of the range.

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These dynamics helped drive sales of $453 million, an increase of 5% sequentially and up 8% compared to last year. Generated $59 million of operating income and earnings per share of $1.17, up 4% and a record first quarter earnings per share for our company. In addition, cash from operations and free cash flow were up 68% and 142% respectively over last year. Steel markets further improved from the fourth quarter with utilization rates reaching close to 80% in the US, and our paper end markets continue to rebound from a slow 2020. Performance Materials, sales in our Household Personal Care and Specialty business increased 14% driven by our Global Pet Care platform, but also double-digit increases in other specialty applications that we've been investing in to enhance our technology and manufacturing capabilities, including Fabric Care, Personal Care and edible oil purification. Metalcasting business performed well, as sales grew 32% driven by strong demand in both North America and Asia from foundries serving automotive, heavy truck, and agriculture markets. Specifically, Metalcasting sales in Asia were up 52% over 2020 with much of this growth coming in China. Penetration of our blended products has also accelerated in China, and sales increased 62% compared to last year. Last quarter in India, which is this -- which is the second largest casting market globally, sales of our blended products were up 21% over 2020. Within our Specialty Minerals segment, our Specialty PCC business had another strong quarter with sales up 17% over last year. Paper PCC sales increased 5% driven by improving end market conditions and the ramp up of new satellites. Finishing up our sales highlights, our refractory segment had a great quarter with sales increasing 7% over 2020 and margins remaining at 16.2%. We see margins above 14% in the second quarter, and have the potential to move higher toward the second half of the year with continued improvement across our businesses. Overall sales in the first quarter were 5% higher sequentially and 8% higher than the prior year as the majority of our end markets remained strong and each of our segments grew sales versus the prior year, now that we combined the Energy Services segment into environmental products within the Performance Materials segment this quarter. Operating income was $58.8 million or 1% higher than the prior year. Lower contribution from these businesses had an unfavorable impact on our margin of approximately 80 basis points in the quarter. This is a normal adjustment we make every quarter, and we are calling it out today because of the size of the variance, which was approximately $3.5 million year-over-year. Adjusting for these impacts, the rest of MTI grew operating margin by 60 basis points over the prior year. In addition, we continue to drive productivity with a 6% year-over-year improvement in the number of hours worked per ton. Earnings per share of $1.17 was a record for our first quarter, and was 4% above prior year and 8% above the fourth quarter, excluding special items. Our effective tax rate for the quarter was 18% and we expect our full year effective tax rate to be approximately 20%. First quarter sales for Performance Materials were $230.9 million, 5% higher sequentially and 9% higher than the prior year. Metalcasting sales increased 6% sequentially and 32% versus the prior year as foundry demand remained strong in both North America and China. Household, Personal Care, and Specialty product sales increased 7% sequentially and 14% versus the prior year on double-digit growth across several consumer-oriented product lines. Building material sales grew 11% sequentially and were 18% lower than the prior year as project activity started to increase late in the first quarter. Meanwhile, environmental products moved through a challenging quarter with sales down 4% sequentially and 29% versus the prior year. Operating income for the segment was $29.8 million, 9% higher than the prior year. Operating margin was 12.9% of sales, at the same level as the prior year. Excluding Environmental Products and Building Materials, which had a weaker quarter than last year, operating margins for the rest of this segment were above 15% in the quarter. Specialty Mineral sales were $147.8 million in the first quarter, 6% higher sequentially and 8% higher than the prior year. Paper PCC sales were 8% higher sequentially and 5% higher than the prior year, as paper mill operating rates continue to improve and all regions grew sales sequentially. Specialty PCC sales increased 4% sequentially and 17% versus the prior year as automotive, construction, and consumer demand remains strong. Process Mineral sales increased 5% sequentially and 10% versus the prior year on strength in residential construction and automotive markets. Segment operating income was $21.1 million, 4% higher than the prior year. Operating margin was 14.3% of sales, and was temporarily impacted by seasonally higher energy costs. Refractory segment sales were $73.9 million in the first quarter, at same level as the fourth quarter, and 7% higher than the prior year, as continued improvement in steel mill utilization rates was offset by fewer laser measurement equipment sales compared to the fourth quarter. Segment operating income was $12 million and represented 16.2% of sales compared to 15% in the fourth quarter and 16.2% in the prior year. Mill utilization rates improved to 78% in North America and 72% in Europe in the first quarter, up from 75% and 70% respectively in the fourth quarter. First quarter cash from operations was $51 million versus $30 million in the prior year, and free cash flow was $33 million versus $14 million in the prior year. We deployed $18 million of capital during the quarter to grow the business, develop our mines, and improve our operations. We used a portion of free cash flow to repurchase $20 million of shares in the first quarter, and we have repurchased $37 million so far under our current $75 million program. The company is in a solid financial position with over $650 million of liquidity and a net leverage ratio of 1.8 times EBITDA. Now from an operating margin perspective, we expect to return to above 14% of sales as we continue to implement pricing actions, proactively manage inflationary cost increases, and drive productivity improvements. As I touched on earlier, our portfolio of consumer products which represents approximately 25% of our total sales, remains a key part of our growth strategy, and we delivered double-digit sales increases in these core business. The first quarter sales in Asia increased 33% with all of our major countries contributing. Specific highlight in the quarter was our PCC growth where we signed a contract with buying paper for a 50,000 ton satellite in China, which should be operational in the second quarter of 2022. 200,000 tons of new production capacity that came online at the end of last year in China and India will further contribute to volume growth this year as they fully ramp up. We're also on track to commission two additional satellites this year totaling over 70,000 tons, one for our packaging application in Europe and another for a standard PCC plant in India. [Indecipherable] mention our new product pipeline, our total portfolio comprises over 300 products from early stage development to commercialization, representing around $800 million of revenue at full potential. This is an increase of about 30% compared to where we were two years ago.

These dynamics helped drive sales of $453 million, an increase of 5% sequentially and up 8% compared to last year. Generated $59 million of operating income and earnings per share of $1.17, up 4% and a record first quarter earnings per share for our company. Earnings per share of $1.17 was a record for our first quarter, and was 4% above prior year and 8% above the fourth quarter, excluding special items.

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We delivered exceptional results driven by differentiated commercial solutions with revenues of $52.5 billion for the first fiscal quarter, representing growth of 10% year-over-year and our adjusted earnings per share increasing 24% versus the prior year quarter. One customer group, for whom we have consistently created new incremental value, is our independent pharmacy customers including our more than 5,000 Good Neighbor Pharmacy and Elevate Provider Network members. These include ensuring that MWI associates are accessible to our customers 24/7 and bolstering our customers' abilities to offer virtual services to a pet caring clients including innovative client communication solutions and home delivery services of quality medications and pet care products. Beginning with our first quarter results, we finished the quarter with adjusted diluted earnings per share of $2.18, an increase of 24%, primarily due to exceptional operating income growth across our businesses. Our consolidated revenue was $52.5 billion, up 10%, driven by revenue growth in both the Pharmaceutical Distribution Services segment and Other, which includes our Global Commercialization Services & Animal Health businesses. Gross profit increased 15% to $1.4 billion, driven by increases in gross profit in each operating segment. In the quarter, gross profit margin increased 12 basis points from the prior year quarter. The PharMEDium comparison and the inventory writedown reversal contributed one-third of the 12 basis point gross profit margin improvement. Consolidated operating income was $617 million, up $122 million or 25% compared to the prior year quarter. To support our revenue growth while protecting, supporting and appropriately compensating our frontline associates, operating expenses grew 8% to $810 million. Operating expenses as a percent of revenue was 1.54% which is a 2 basis point decline from the prior year quarter. Moving now to net interest expense, which increased $3 million to $34 million primarily due to a decrease in interest income resulting from a decline in investment interest rates. Our effective tax rate was 22%, up from 21%, in the first quarter of fiscal 2020. Our diluted share count declined modestly to 206.8 million shares. Regarding free cash flow and cash balance, our adjusted free cash flow was $838 million in the first quarter. We ended the quarter with $4.9 billion of cash of which $1.1 billion was held offshore. Beginning with Pharmaceutical Distribution Services, segment revenue was $50.5 billion, up 10%, driven by increased specialty product sales, including COVID-19 therapies, as well as growth at some of our largest customers and broadly across our businesses. Segment operating income increased about 27% to $496 million with operating income margin up 13 basis points. As a reminder, the exit of the PharMEDium business represented a $20 million tailwind to the segment's operating income, roughly half of which is in gross profit and the other half in operating expense. Excluding the PharMEDium tailwind, segment operating income growth would have been up 20%. In the quarter, total revenue was $2.1 billion, up 11%, driven by growth across the three operating segments. Operating income for the group was up $17 million or 16%, primarily due to growth at MWI and World Courier. So I will now turn to our fiscal 2021 guidance. Given the cash needs associated with the Alliance acquisition, we are narrowing our guidance from a range of 206 million to 207 million and we now expect to finish the year around 207 million shares outstanding. All other financial guidance metrics for fiscal 2021 remain unchanged.

We delivered exceptional results driven by differentiated commercial solutions with revenues of $52.5 billion for the first fiscal quarter, representing growth of 10% year-over-year and our adjusted earnings per share increasing 24% versus the prior year quarter. Beginning with our first quarter results, we finished the quarter with adjusted diluted earnings per share of $2.18, an increase of 24%, primarily due to exceptional operating income growth across our businesses. So I will now turn to our fiscal 2021 guidance. All other financial guidance metrics for fiscal 2021 remain unchanged.

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Organic revenues this quarter were up 10.5%, adjusted EBITDA was up 30% and adjusted earnings per share of $0.66 was nearly doubled last year's first quarter. As we reported last March, COVID-19 impacted our fiscal Q1 of 2020 only in China and by about $15 million in revenue, $4.5 million in EBITDA and $0.06 of EPS. Excluding this impact, our revenues were up 8% organically, EBITDA was up 23% and earnings per share was up 65%, exceptional results. EBITDA margin increased 190 basis points year-on-year. However, we now expect year-on-year raw material inflation to be in the range of 5% to 8%. H.B. Fuller has done a remarkable job in supporting customers through supply shortages and we also have implemented over $100 million in annualized price adjustments that are effective in Q2 and will enable us to continue to seamlessly serve our customers. Hygiene, Health and Consumable Adhesives' first quarter organic sales increased 7.6% year-over-year, continuing the strong performance trend in this business unit in 2020. HHC segment EBITDA margin was strong at 13.3%, up 180 basis points, margin improved versus last year, reflecting volume leverage, restructuring benefits and good expense management. Construction Adhesives' organic revenue was down 10% versus last year as winter storm Uri, extreme weather and material supply issues across much of the United States impacted construction activity as we started the year. Engineering Adhesive results were extremely strong with organic revenue up 21% versus last year, reflecting share gains and improving end market demand. Engineering Adhesives' EBITDA margins were strong at 15.4%, up 300 basis points compared with Q1 last year, reflecting strong volume leverage and good expense management. Overall, when considering our strategic pricing actions, coupled with the solid volume growth in HHC, improved performance in Construction Adhesives and strong demand in Engineering Adhesives, we now expect full year revenue growth of high single digits to low double-digits versus 2020. Net revenue was up 12.3% versus same period last year. Currency had a positive impact of 1.8%. Adjusting for currency, organic revenue was up 10.5% with volume accounting for all of the growth. Year-on-year adjusted gross profit margin was 26.7%, up 20 basis points versus last year, driven by the higher volume. Adjusted selling, general and administrative expense was up 2.9% versus last year. SG&A was down 170 basis points as a percentage of revenue, reflecting savings associated with our business reorganization, lower travel expense, general cost controls, offset by higher variable comp than last year. Net other income increased by $3 million versus last year, driven primarily by increased income on pension assets. Net interest expense declined by $2 million, reflecting lower debt balances. The adjusted effective income tax rate in the quarter was 27.5%, up 180 basis points versus the adjusted tax rate in the first quarter last year, driven primarily by mix of income and tax related to the global cash strategies. Adjusted EBITDA for the quarter of $101 million is 30% higher than the same period last year, driven by strong top-line growth, particularly in Engineering Adhesives, restructuring savings and good cost management, partially offset by higher variable compensation. Adjusted earnings per share was $0.66, up 94% versus the first quarter of last year, reflecting strong operating income growth and lower interest expense associated with our debt reduction. Cash flow from operations in the quarter of $36 million was up from last year, reflecting strong income growth, partly offset by higher working capital requirements to support the strong top-line performance. We continue to reduce debt paying down $16 million in the quarter compared to $6 million during the same period last year. Regarding our outlook, based on what we know today and the planning assumptions that Jim laid out earlier, we anticipate revenue to be up high single-digits to low double-digits versus 2020 and EBITDA to be between $455 million and $475 million as continued strong volume growth and pricing actions offset higher raw material costs. We expect cash flow to be strong for the rest of the year, allowing us to maintain our target to pay down approximately $200 million of debt during 2021. We will also deliver an additional $200 million of debt reduction in 2021, moving the company closer to our net debt target of 2 to 3 times EBITDA.

Organic revenues this quarter were up 10.5%, adjusted EBITDA was up 30% and adjusted earnings per share of $0.66 was nearly doubled last year's first quarter. However, we now expect year-on-year raw material inflation to be in the range of 5% to 8%. Overall, when considering our strategic pricing actions, coupled with the solid volume growth in HHC, improved performance in Construction Adhesives and strong demand in Engineering Adhesives, we now expect full year revenue growth of high single digits to low double-digits versus 2020. Adjusted earnings per share was $0.66, up 94% versus the first quarter of last year, reflecting strong operating income growth and lower interest expense associated with our debt reduction. Regarding our outlook, based on what we know today and the planning assumptions that Jim laid out earlier, we anticipate revenue to be up high single-digits to low double-digits versus 2020 and EBITDA to be between $455 million and $475 million as continued strong volume growth and pricing actions offset higher raw material costs. We expect cash flow to be strong for the rest of the year, allowing us to maintain our target to pay down approximately $200 million of debt during 2021. We will also deliver an additional $200 million of debt reduction in 2021, moving the company closer to our net debt target of 2 to 3 times EBITDA.

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Starting with our financial results, adjusted earnings were $2.1 billion, up 31% year-over-year. Adjusted earnings per share were $2.39, up 38% year-over-year. Excluding total notable items in both periods, adjusted earnings were up 24% and adjusted earnings per share was up 31%. On the investment side, our private equity portfolio returned $1.5 billion in Q3, its highest quarterly contribution in 2021 and the major contributor to VII, which was well above the top end of our implied quarterly guidance range. On underwriting, in our U.S. business, the Group Life mortality ratio was elevated at 106.2% in Q3 on higher claim severity and frequency due to a shift younger in the age distribution of COVID death. Our Latin America business incurred COVID losses of $137 million in Q3. Pandemic to-date in our U.S. Group business, which incurred U.S. life claims of around $2.1 billion. From a financial perspective even though our Life businesses have been hit with the most severe pandemic in more than a 100 years, they remain profitable. The return on our PE portfolio in the quarter was an outstanding 12.6% and stands at approximately 36% year-to-date. Year-to-date we have received $1.9 billion in cash distributions from our PE funds. Since 2016, the figure is $7.6 billion. In U.S. Group Benefits, adjusted PFOs grew 13% year-over-year. Excluding Versant Health, PFO growth was 6.2% on strong jumbo sales and persistency. Year-to-date sales are up 40% over the prior period and we remain on track for a record sales year. In connection with open enrollment season this fall, we conducted consumer research on benefit preferences among millennials who are now the largest age group cohort in the U.S. with more than 70 million members. Within our RIS business, after a quiet first three quarters, we have already booked four cases totaling $3.5 billion of pension risk transfer deals in the first month of the fourth quarter. Of the 253 respondents, nearly seven in tenth have pension plan assets of $500 million or more and 93% intend to divest all of their defined benefit pension liabilities at some point in the future, up from 76% in 2019. Elsewhere in RIS, excluding PRTs from both periods, adjusted PFOs were up 70% year-over-year. In Latin America, we delivered exceptional sales growth in the quarter, up 45% year-over-year on a constant currency basis. Moving to cash and capital, MetLife ended the third quarter with $5.1 billion of cash at its Holding company. During the quarter, we paid $400 million in common stock dividends, and repurchased $1 billion worth of outstanding common shares with another $233 million repurchased so far in Q4. We have $2.5 billion remaining on the $3 billion share repurchase authorization we announced in August. We are on track to return more than $5.5 billion of capital to shareholders in 2021 and we continue to strive for a balanced mix between business investment and capital return. In 2020 for example, we returned $2.8 billion to shareholders and invested approximately $5 billion in organic growth and M&A. This year, in addition to organic growth, we increased the stake in our India joint venture, PNB MetLife to 47% from 32%. Consistent with that strategy, we are increasing our exposure to a market where PNB MetLife has access to more than 200 million customers across 15,000 sales locations. Starting on page 3, we provide a comparison of net income to adjusted earnings. Net income in the third quarter was $1.5 billion or $541 million lower than adjusted earnings. Net derivative losses of $172 million were primarily driven by the strengthening of the U.S. dollar in the quarter. In addition, our actuarial assumption review accounted for $76 million of the variance between net income and adjusted earnings. In total, the assumption review reduced net income by $216 million, including a notable item to adjusted earnings of $140 million. The table on page 4 provides highlights of the actuarial assumption review with the breakdown of the adjusted earnings and net income impact by business segment. We have kept our U.S. mean reversion interest rate unchanged at 2.75% and maintain our long-term mortality assumptions despite the near-term impacts from COVID-19. On page 5, you can see the year-over-year comparison of adjusted earnings by segment excluding notable items in both periods. Adjusted earnings, excluding notable items were $2.2 billion, up 24% and up 23% on a constant currency basis, primarily driven by strong returns in our private equity portfolio. Adjusted earnings per share excluding notable items was $2.56, up 31% year-over-year on both a reported and constant currency basis aided by Capital Management. Moving to the businesses starting with the U.S.; Group Benefits adjusted earnings were down 72% year-over-year driven by unfavorable underwriting margins in Group Life, which I'll discuss in more detail shortly. Regarding non-medical health, the interest adjusted benefit ratio was 70.7% in 3Q of '21 at the low end of its annual target range of 70% to 75% but higher than the prior year quarter of 67.4%, which benefited from extremely low dental utilization and favorable disability incidence. Year-to-date sales were up 40% primarily due to higher jumbo case activity. Adjusted PFOs in the quarter were up 13% year-over-year driven by solid volume growth across most products, including voluntary and the addition of Versant Health. Retirement Income Solutions or RIS adjusted earnings were up 60% year-over-year. RIS investment spreads were 256 basis points, up 100 basis points year-over-year due to higher variable investment income. Spreads excluding VII were 93 basis points, down 5 basis points year-over-year and sequentially primarily due to lower paydowns in our portfolios of residential mortgage-backed securities and residential mortgage loans. RIS liability exposures including UK longevity reinsurance increased 4% year-over-year due to solid volume growth across the product portfolio. With regards to pension risk transfers as Michel noted, we have already completed $3.5 billion of transactions in the fourth quarter and continue to see an active market. Moving to Asia, adjusted earnings were up 31% on both a reported and constant currency basis, primarily due to higher variable investment income. Asia's solid volume growth also contributed to the strong performance driven by higher general account assets under management on an amortized cost basis, which were up 7% on a constant currency basis. Asia sales were down 12% year-over-year on a constant currency basis, reflecting pressure from COVID-related lockdowns in the regions. Asia year-to-date sales were up 10% on a constant currency basis and remain on target to achieve double-digit growth in 2021. Latin America adjusted earnings were down 35% and down 38% on a constant currency basis, primarily driven by unfavorable underwriting margins due to elevated COVID-19 related claims mainly in Mexico. The impact to Latin America's third quarter adjusted earnings was approximately $137 million. Latin America adjusted PFOs were up 22% year-over-year on a constant currency basis and sales were up 45% on a constant currency basis, driven by solid growth across most markets. EMEA adjusted earnings were up 20% on both a reported and constant currency basis, primarily driven by volume growth across the region and favorable underwriting margins, primarily in the Gulf. EMEA adjusted PFOs were down 2% on a constant currency basis and sales were down 5% on a constant currency basis, reflecting divested businesses, partially offset by growth in Turkey and Europe. MetLife Holdings adjusted earnings, excluding notable items in both periods were up $271 million year-over-year. However, the life interest adjusted benefit ratio of 53.3% was within our annual target range of 50% to 55%. Corporate and other adjusted loss was $131 million in both periods. The company's effective tax rate on adjusted earnings in the quarter was 20.6% and within our 2021 guidance range of 20% to 22%. Now, I'll provide more detail on Group Benefits mortality results on page 6. Group Life mortality ratio 106% in the third quarter of 2021, which is well above our annual target range of 85% to 90%. COVID reported claims in 3Q of '21 were roughly 18 percentage points, which reduced Group Benefits' adjusted earnings by approximately $290 million. Approximately 40% of U.S. COVID deaths in the quarter were under age 65, about double the rate of the first quarter of this year and the highest percentage in any quarter since the pandemic began and therefore having a greater proportional impact on the working-age population. In addition, we estimate that the quarter included roughly 1 to 2 incremental percentage points impact on the mortality ratio from claims that appear to be COVID-related, but were not specifically identified as COVID on the death certificate. Group Benefits reported adjusted earnings of roughly $450 million year-to-date and adjusted PFO growth of 13%. Now let's turn to page 7. This chart reflects our pre-tax variable investment income over the last five quarters, including approximately $1.8 billion in the third quarter. This very strong result was mostly attributable to the private equity portfolio, which had a 12.6% return in the quarter. While all private equity asset classes performed well in the quarter, our venture capital funds, which account for roughly 23% of our PE account balance of $12.8 billion were the strongest performer across subsectors with a roughly 18% quarterly return. Page 8 highlights VII by segment for the first three quarters of 2021 including $1.4 billion post tax in the third quarter. As we have previously noted, RIS MetLife Holdings, and Asia generally account for 90% or more of the total VII and are split roughly one-third each although it can vary from quarter-to-quarter. Turning to page 9, this chart shows our direct expense ratio over the prior five quarters and full year 2020 including 11.1% in the third quarter of '21. This did include approximately 20 basis points from premiums that relate to participating cases and 20 basis points from a single premium Group Life sale in RIS. Now let's turn to page 10; this chart reflects new business value metrics from MetLife major segments for the past five years, including an update for 2020. As evidence of that commitment, MetLife's invested $3.2 billion of capital in 2020 to support new business, which was deployed at an average unlevered IRR of approximately 17% with a payback period of six years. Now, I will discuss our cash and capital position on page 11. Cash and liquid assets at the Holding companies were $5.1 billion as of September 30, which is down from $6.5 billion at June 30, but still well above our target cash buffer of $3 billion to $4 billion. The sequential decrease in cash at the Holding companies include the net effects of share repurchases of $1 billion, payment of our common stock dividend of roughly $400 million, subsidiary dividends as well as holding company expenses and other cash flows. In addition, we had a long-term debt repayment of $500 million in the third quarter. For our U.S. companies, preliminary third quarter year-to-date 2021 statutory operating earnings were approximately $4 billion, while net income was approximately $3 billion. Statutory operating earnings increased by approximately $1 billion year-over-year primarily driven by higher variable investment income and lower variable annuity rider reserves. Year-to-date 2021 net income increased by roughly $400 million as compared to the first nine months of 2020. We estimate that our total U.S. statutory adjusted capital was approximately $19.7 billion as of September 30, 2021, up 16% compared to December 31, 2020. Finally, the Japan solvency margin ratio was 960% as of June 30, which is the latest public data.

Adjusted earnings per share were $2.39, up 38% year-over-year. Statutory operating earnings increased by approximately $1 billion year-over-year primarily driven by higher variable investment income and lower variable annuity rider reserves.

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Reflecting on the past 18 months amid a historically challenging environment due to the COVID-19 pandemic, I am incredibly proud of Under Armour's global team and the way we've worked to hold ourselves accountable to our strategic playbook. In Footwear, Flow Velociti performed well in all regions, as did HOVR Phantom and Machina 2, including significant growth against last year's already strong performance. Our Charged Pursuit 2 and Assert 9 footwear offerings also posted substantial numbers, demonstrating continued success in our segmentation strategy to bring premium innovations across all price points. In Curry, we saw success on and off court with our Curry Flow 8 signature shoe as well as retro styles that we pre-released in APAC, all good signs of momentum as we work toward the launch of the Curry 9 late this year. And finally, the Project Rock 3 shoe, which combines UA HOVR and TriBase technologies for a highly comfortable and stable training platform, was also a standout. Versus 2019, North American revenue was up 11% in the second quarter and about 3% for the first half of the year. With second-quarter revenue up 25% versus 2019 or up 35% for the first half on a two-year stack, our results gives us confidence that the additional investments we're making into marketing, CRM, digital activations, and store expansions are working to drive greater brand affinity amid a highly competitive backdrop. Second-quarter revenue was up 43% over 2019 and up 44% for the first six months on a two-year stack. And finally, our Latin America region, where second-quarter revenue was up 17% over 2019 or is up 7% for the first six months on a two-year stack. With a 33% increase in revenue for the second quarter and a 32% increase for the first half versus 2019, we're pleased to see the results of our multifaceted strategies come to fruition. Ensuring that they feel valued and appreciated, we increased our minimum pay rate to $15 per hour in our U.S. business as part of a larger effort that includes professional learning and development opportunities and additional incentive plans. In our e-commerce business, revenue was down 18% in the quarter, a result that we anticipated being the most challenging of the year considering the shift to online in 2020 following the retail lockdown. That said, given the work we did to exit the highly promotional elements that this business experienced in 2019, along with the investments we've made in our platforms and teams over the last 18 months, and we're very encouraged by a 53% second-quarter increase versus 2019 or a 55% increase for the first six months on a two-year stack. Throw in that we expect our eCommerce business to be up at a high single-digit rate in 2021, and that puts our growth up nearly 50% on a two-year stack. In the second quarter, revenue was up 91% to 1.4 billion compared to the prior year. From a channel perspective, our wholesale revenue was up 157%, driven by broad-based growth, as we lap the most significant impact from the retail door closures in the prior year. Our direct-to-consumer business increased 52%, led by 234% growth in our owned and operated retail stores, partially offset by an 18% decline in e-commerce, which faced a difficult comp as it was the primary business driver of last year's second quarter. Our licensing revenues were up 276%, driven by increases in our North American partner business. By product type, Apparel revenue was up 105%, driven by strength in our train, golf, and run categories. Footwear was up 85%, driven by our run and team sports categories. And our accessories business was up 99%, driven by hats, bags, and sports masks. From a regional and segment perspective, second-quarter revenue in North America was up 101%. In EMEA, revenue was up 133%, driven by growth in wholesale and DTC, with significant strength across our wholesale and distributor partners. Revenue in Asia Pacific was up 56%, with balanced growth across all channels. And in Latin America, revenue was up 317%, driven primarily by lapping the store closures in the prior year. Second-quarter gross margin came in better than expected, improving 20 basis points to 49.5%, driven by 570 basis points of pricing improvements due to lower promotional activity within our DTC channel, along with lower promotions and markdowns within our wholesale business, which was significantly impacted by the pandemic in the prior year, and 100 basis points of benefit due to changes in foreign currency. Offsetting these improvements was a 460 basis point negative impact from channel mix, primarily driven by a lower mix of e-commerce and a larger mix of wholesale, including a higher percentage of off-price sales than last year when this channel was essentially closed for most of the quarter. Additionally, we realized 170 basis points of negative gross margin impact related to the absence of MyFitnessPal, which will remain a headwind throughout 2021. And finally, a 10 basis point negative impact within supply chain as our continued benefits and product costs were more than offset by higher freight and logistics costs due to developing COVID-related supply chain pressures. SG&A expenses were up 14% to 545 million, primarily due to higher marketing costs and expenses tied to store operations, given most retail locations were closed throughout the second quarter of 2020. Relative to our 2020 restructuring plan, we recorded 3 million of charges in the second quarter, an amount less than we had anticipated due to the timing of specific executions such as the realization of lease and contract terminations. Throughout the plan thus far, we've realized 483 million of pre-tax restructuring and related charges. As detailed last September, this plan contemplates total charges ranging from 550 to 600 million. For the quarter -- for the third quarter, we expect to realize approximately 40 to 50 million in charges related to this plan. Our second-quarter operating income was 121 million. Excluding restructuring and impairment charges, adjusted operating income was 124 million. After tax, we realized a net income of 59 million or $0.13 of diluted earnings per share during the quarter. Excluding restructuring charges, loss on extinguishment of 250 million in principal amount of senior convertible notes, and the non-cash amortization of debt discount on our senior convertible notes, our adjusted net income was 110 million or $0.24 of adjusted diluted earnings per share. Inventory at the end of the second quarter was down 26% to 881 million as we continue to drive improvements throughout our operating model, along with experiencing some inbound shipping delays due to COVID-related supply chain pressures. Our cash and cash equivalents were 1.3 billion at the end of the quarter, and we had no borrowings under our 1.1 billion revolving credit facility. With respect to debt, during the second quarter, we entered into exchange agreements with certain convertible bondholders for 250 million in principal amount of our outstanding convertible notes and terminated certain related capped call transactions. We utilized net 247 million in cash, issued 11 million shares of our Class C stock, and recorded a related loss of approximately 35 million, which is captured in other income and expenses. Post this transaction, 250 million of our convertible bonds remain outstanding. That said, let's start at the top with revenue, which we now expect to be up at a low 20s percentage rate for the full year. For gross margin, on a GAAP basis, we expect the full-year rate to be up 50 to 70 basis points against our 2020 adjusted gross margin of 48.6%, with benefits from pricing and benefits from changes in foreign currency being partially offset by the sale of MyFitnessPal, which carried a high gross margin rate, along with higher expected freight expenses. With that, we now expect operating income to reach 215 to 225 million this year or 340 to 350 million on an adjusted basis. Translated to rate, we expect to deliver an operating margin of approximately 4% or an adjusted operating margin just north of 6% in 2021. All of this takes us to an expected diluted earnings per share of 14 to $0.16 or, excluding restructuring charges, the loss on early extinguishment of convertible senior notes and noncash amortization of debt discount on these convertible senior notes, we expect adjusted diluted earnings per share of 50 to $0.52 in 2021. Next, we expect third-quarter gross margin to be up 130 to 150 basis points due to pricing benefits and channel mix as we anticipate lower promotional activity and lower sales to the off-price channel. Bringing this to the bottom line, we expect third-quarter adjusted operating income to be 95 to 105 million or 13 to $0.15 of adjusted diluted earnings per share.

In the second quarter, revenue was up 91% to 1.4 billion compared to the prior year. For the quarter -- for the third quarter, we expect to realize approximately 40 to 50 million in charges related to this plan. After tax, we realized a net income of 59 million or $0.13 of diluted earnings per share during the quarter. Excluding restructuring charges, loss on extinguishment of 250 million in principal amount of senior convertible notes, and the non-cash amortization of debt discount on our senior convertible notes, our adjusted net income was 110 million or $0.24 of adjusted diluted earnings per share. That said, let's start at the top with revenue, which we now expect to be up at a low 20s percentage rate for the full year. All of this takes us to an expected diluted earnings per share of 14 to $0.16 or, excluding restructuring charges, the loss on early extinguishment of convertible senior notes and noncash amortization of debt discount on these convertible senior notes, we expect adjusted diluted earnings per share of 50 to $0.52 in 2021.

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Looking at the full year, we had a strong fiscal 2021 with 10% revenue growth and our highest operating margin since fiscal 2014, and we created considerable momentum across many of our growth initiatives, that will allow more people to be entertained by premium Dolby experiences. Let's start with our foundational audio technologies, which include Dolby Digital Plus, AC-4 and our audio patent licensing. In FY '21, our foundational audio technologies grew about 11% year-over-year, due largely to robust global shipments of DCs and higher TV volumes, particularly in North America and Europe. In total, this portion is approaching one quarter of our licensing revenue and grew nearly 20% in FY '21. We see this growth accelerating to over 35% in FY '22. This quarter, the launch of the iPhone 13 lineup again highlighted the capability to enable consumers to record and share their videos in Dolby Vision. And collectively, we estimate the addressable market to be about $5 billion and growing. Total revenue in the fourth quarter was $285 million, which was within the total revenue guidance range we provided, and also included a favorable true-up of about $3 million for Q3 shipments reported, that were above the original estimate. With our Q4 results, full year 2021 revenues were $1.28 billion compared to $1.16 billion in fiscal year 2020, generating 10% year-over-year growth. Within that, licensing revenue was $1.21 billion, while products and services revenue was $67 million. On a year-over-year basis, fourth quarter revenue was about $14 million above last year's Q4, as we benefited from greater adoption of Dolby Vision and Dolby Atmos and higher cinema-related revenues, partially offset by lower true-ups. Q4 revenue was comprised of $266 million in licensing and $19 million in Products and services. Broadcast represented about 39% of the total licensing in fiscal year 2021. Our full year revenues grew by $36 million or 8% on a year-over-year basis, driven by higher adoption of Dolby Vision and Dolby Atmos in TVs and set-top boxes. Mobile represented approximately 22% of total licensing in fiscal 2021. Mobile revenue increased by $34 million or 15% compared to fiscal 2020, as our foundational audio revenues benefited from timing of revenues, and we saw higher Dolby Vision revenues from increased adoption. Our Q4 mobile revenues were up about 2% compared to the prior year, due to higher adoption of Dolby Vision and Dolby Atmos. Consumer electronics represented about 15% of total licensing in fiscal year 2021. On a year-over-year basis, CE licensing increased by $29 million or 19%, driven by higher foundational audio revenues, as a result of increased unit volumes in soundbars and AVRs, as well as higher recoveries. Our Q4 CE revenues increased 28% compared to prior year, which was in line with full year growth drivers of both higher foundational audio revenues and growing adoption of Dolby Atmos and Dolby Vision. PC represented about 12% of total licensing in fiscal year 2021. Our fiscal year '21 PC revenues were higher than prior year by about $10 million or 7%, driven by higher foundational audio revenues, as a result of strong PC shipments throughout the year and growing revenues from Dolby Atmos and Dolby Vision. Our Q4 PC revenues were about 7% higher compared to prior year Q4, driven by increased Dolby Vision and Dolby Atmos revenues. Other markets represent about 12% of total licensing in fiscal year 2021. They were up about $26 million or 21% year-over-year, driven by higher revenues from gaming, due to the console refresh cycle and higher foundational revenues related to patents. In Q4, we saw other markets grow about 26% year-over-year due to increased Dolby Cinema revenues as theaters reopen, and higher revenues from gaming. As we look ahead to fiscal '22, we anticipate that other markets revenues could grow at an even higher rate of over 25%, as we estimate Dolby Cinema revenues to continue momentum from Q4, as more people are able to return to the movies and we also see continued growth in gaming. Beyond licensing, our products and services revenue was $67 million in fiscal year '21, compared to $83 million in fiscal year 2020. Products and services revenue in Q4 was $19 million compared to $14 million in last year's Q4. Total gross margin in the fourth quarter was 89.2% on a GAAP basis and 90% on a non-GAAP basis. Operating expenses in the fourth quarter on a GAAP basis were $214 million. Operating expenses in the fourth quarter on a non-GAAP basis were $189.9 million, compared to $176.5 million in the prior year. Operating income in the fourth quarter was $40.4 million on a GAAP basis or 14.2% of revenue, compared to $30.1 million or 11.1% of revenue in Q4 of last year. Operating income in the fourth quarter on a non-GAAP basis was $66.6 million or 23.4% of revenue, compared to $54.3 million or 20% of revenue in Q4 of last year. On a full year basis, operating income was $344.4 million on a GAAP basis or about 26.9% of revenue, compared to $218.7 million or 18.8% in fiscal 2020. Full year operating income in fiscal '21 on a non-GAAP basis was $450.7 million or about 35.2% of revenue compared to $317.9 million or 27.4% in the prior year. Income tax in Q4 was minus 3% on a GAAP basis and 13% on a non-GAAP basis. Net income on a GAAP basis in the fourth quarter was $44.2 million or $0.42 per diluted share compared to $26.8 million or $0.26 per diluted share in last year's Q4. Net income on a non-GAAP basis in the fourth quarter was $60.4 million or $0.58 per diluted share, compared to $45.8 million or $0.45 per diluted share in Q4 of last year. During the fourth quarter, we generated $110 million in cash from operations compared to $113 million generated in last year's fourth quarter. We ended the fourth quarter with about $1.3 billion in cash and investments. During the fourth quarter, we bought back about 1 million shares of our common stock and ended the quarter with about $291 million of stock repurchase authorization available going forward. We also announced today a cash dividend of $0.25 per share, an increase of $0.03 or 14% compared to the prior quarter. We currently estimate total fiscal year '22 revenues could range from $1.34 billion to $1.4 billion. This would result in about 5% to 9% of year-over-year growth as compared to the $1.28 billion in fiscal year 2021. Within this, licensing revenue could range from $1.260 billion to $1.315 billion compared to $1.214 billion in fiscal year '21, which would result in a 4% to 8% year-over-year growth. For products and services revenues, we anticipate this could range from $75 million to $90 million for fiscal year '22, with improvements in cinema products and growth in Dolby.io. With these considerations, we are estimating operating expenses for fiscal 2022 could range from $869 million to $889 million on a GAAP basis and between $750 million to $770 million on a non-GAAP basis. With all of this, our business model remains very strong, as we expect to deliver operating margins between 24% to 26% on a GAAP basis, and between 34% and 36% on a non-GAAP basis. Based on the factors above, we estimate that full year diluted earnings per share will range from $2.53 to $3.03 on a GAAP basis and $3.52 to $4.02 on a non-GAAP basis. For Q1, we see total revenues ranging from $345 million to $375 million. Within that, licensing revenues will range from $330 million to $355 million. Note that in the prior year Q1, we benefited from a significant favorable true-up of over $21 million for Q4 fiscal '20 shipments, that was larger than normal, given the volatility of conditions during the pandemic. Q1 products and services revenue could range from $15 million to $20 million. Q1 gross margin on a GAAP basis is expected to be 90% to 91%, and the non-GAAP gross margin is estimated to be about 91% to 92%. Operating expenses in Q1 on a GAAP basis are estimated to range from $221 million to $231 million. Operating expenses in Q1 on a non-GAAP basis are estimated to range from $190 million to $200 million, which contemplates the impact of the 53-week fiscal year. Other income is projected to range from $1 million to $2 million for the first quarter. And our effective tax rate for Q1 is projected to range from 18% to 19% on both a GAAP and non-GAAP basis. Based on the combination of the factors I just covered, we estimate that Q1 diluted earnings per share could range from $0.71 to $0.86 on a GAAP basis and from $0.98 to $1.13 on a non-GAAP basis.

Total revenue in the fourth quarter was $285 million, which was within the total revenue guidance range we provided, and also included a favorable true-up of about $3 million for Q3 shipments reported, that were above the original estimate. Net income on a GAAP basis in the fourth quarter was $44.2 million or $0.42 per diluted share compared to $26.8 million or $0.26 per diluted share in last year's Q4. Net income on a non-GAAP basis in the fourth quarter was $60.4 million or $0.58 per diluted share, compared to $45.8 million or $0.45 per diluted share in Q4 of last year. We currently estimate total fiscal year '22 revenues could range from $1.34 billion to $1.4 billion. Based on the factors above, we estimate that full year diluted earnings per share will range from $2.53 to $3.03 on a GAAP basis and $3.52 to $4.02 on a non-GAAP basis. For Q1, we see total revenues ranging from $345 million to $375 million. Based on the combination of the factors I just covered, we estimate that Q1 diluted earnings per share could range from $0.71 to $0.86 on a GAAP basis and from $0.98 to $1.13 on a non-GAAP basis.

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We will start on Page 3, with recent highlights from the second quarter and as you can imagine, I'm extraordinarily pleased with the way our teams have executed in the midst of this pandemic in the economic downturn. Q2 earnings on a per share basis were $0.13 on a GAAP basis and $0.70 on adjusted basis, which excludes $0.20 of charges related to acquisitions and divestitures and $0.37 related to the multi-year restructuring program that we just announced. Our Q2 revenues were $3.9 billion, down 22% organically. As we noted on our Q1 earnings call, April was down approximately 30%, this was followed by slightly better volumes in May and then relatively strong finish in June, which was down, let's call it low double-digits. Segment margins were 14.7%, down 110 basis points from Q1 and our detrimental margins were at 25%, 5 points better than our guidance of 30%. However, recognizing that some of our businesses could be looking at a slow and certainly what you could call it, prolong recovery, we announced a multi-year restructuring program of $280 million, including $187 million charge in Q2. These actions will reduce structural cost for sure and are targeted in those end markets, including commercial aerospace, oil and gas, NAFTA Class 8 truck and North America and European light vehicle markets, where these markets have been certainly highly impacted. The other clear highlight for the quarter was our operating cash flow, which was $757 million and free cash flow of $667 million. Both very strong results and which gives us the ability to really reaffirm our free cash flow guidance of $2.3 billion to $2.7 billion and a midpoint of $2.5 billion. Finally, as most of you know, we made an important announcement during the quarter regarding sustainability and our commitment to 2030 sustainability goals. I thought it'd be helpful just to put this announcement in the context in order to show you how it fits within the broader strategic framework of the company, which we do on Page 4. Sustainability, as we think about it, really presents growth opportunities to help our customers solve their business goals and to this extent and have been so subjective, we've laid out 10-year plans that include investing $3 billion in R&D to create sustainable products over this period of time. This will also include reducing our emissions from our installed base of products and upstream sources by some 15%. Since 2015, we reduced our absolute greenhouse gas emissions by some 16% and we're certainly on track to deliver our 2025 targets. By 2030, we now have committed to achieve science-based targets of 50% reduction of greenhouse gas emissions from 2018 levels. Now turning to Page 5, we summarize our Q2 financial results and I noticed a couple of things on this page. First, acquisitions increased sales by 2%, this was more than offset by the 8% impact from divestitures and also we had negative currency impact of negative 2%. Next on Page 6, we show our results for Electrical Americas. Revenues down 29%, 9% decline organic revenue,19% impact from M&A and this was primarily the divestiture of the Lighting business and a small impact from negative currency as well of 1%. Operating margins increased 130 basis points to 20.7% and these margins were certainly favorably impacted by the divestiture of Lighting, but also our teams did a great job of controlling costs to really counter the impact of the economic impact of COVID-19. This combination resulted in a very strong decremental margin performance, up 16%. Orders increased 2.1% on a rolling 12-month basis with strength in residential and utility in data centers. And of note here, our data center orders actually were up some 7% on a rolling 12-month basis. They were up 11% versus last year. Turning to Page 7, we have our results for the Electrical Global segment. Revenues were down 16% with 14% decline in organic revenues and 2% headwind from currency. Operating margins here declined some 160 basis points, but to a very respectable 16% and decremental margins here were also very well managed, coming in at 26%. Orders declined 4.6% on a rolling 12-month basis, but with most of the significant declines coming, as you would expect in global oil and gas markets and in industrial markets. And lastly, our backlog for Electrical Global increased 2% on a year-over-year basis. On Page 8, we summarized our Hydraulics segment. For Q2, revenues were down 32%, with a 30% decline organically and a 2% currency impact. Operating margins were 9% and orders for the quarter were down 33.7% year-over-year and this was driven really by weakness in both OEMs and the distributor channel both. On Page 9, we summarize results for the Aerospace segment. Revenues declined 27% with a negative 35% in organic growth offset by 8% increase from the acquisition of Souriau. Operating margins declined to 14.8% and really this is due to lower sales, but also the acquisition of Souriau also had a dilutive impact on margins. Orders declined 12.8% on a rolling 12-month basis with particular weakness in the quarter, as you would expect in commercial OEM and aftermarket, it is worth noting, I would tell you though that orders for the military aftermarket were up 13% on a rolling 12-month basis. Backlog was down 5% year-over-year overall. Next on Page 10, we summarize the results for the Vehicle segment. Revenues declined 59%, 52% of which was organic in addition to the divestiture of the Automotive Fluid Conveyance business which impacted revenues by 4%, we had 3% negative impact of currency. The decrease in organic sales was really driven by I'd say, widespread customer plant shutdowns due to COVID-19, which really resulted in lower Class 8 OEM production as well as continued weakness in light vehicle production. Global light vehicle market production was down 55% in Q2 and Class 8 OEM build was down from 70% in Q2. We now project NAFTA Class 8 production to be 175,000 units for the year, which is down slightly from our prior forecast 189,000 units. But still down some 49% from 2019. This steep reduction and certainly -- this sudden reduction in OEM production led to operating margins of a negative 6.4%, but I would add, this business has once again done a great job managing decrementals and despite this tremendous reduction in revenue delivered a respectable decremental margin of 33%. Moving to Page 11, we have our eMobility segment. Revenues were down 33%, all of which was organic. Organic margins of negative 3.6% -- excuse me, operating margins of negative 3.6% primarily due to lower volumes and a particular weakness in the legacy internal combustion engine platforms. A good example of this idea of everything becoming more Electric is one of the recent wins that we've had with the truck OEM, a $21 million program for export power inverter where major commercial truck customer and so, in almost every aspect of our business there is more electrical content and we're well positioned once again through this particular segment to participate in that growth. Overall, we've won programs with a value of approximately $500 million of mature-year revenue. On Page 12, we show the details of our plans to accelerate and I'd say, expand our restructuring actions. We announced the $280 million multi-year restructuring program, as I noted, designed to eliminate structural costs and we've taken charges of $187 million in Q2 and then we expect to see additional cost of $93 million realized through 2022. Just to characterize those additional dollars, we'd expect to deliver over the next three years some $33 million of charges in the second half of this year, $55 million in 2021 and $5 million in 2022. We would expect to realize $200 million of mature-year benefits from these actions once they are fully implemented and we think full year implementation is 2023. And then, turning to Page 13, we do our best to provide Q3 outlook on revenues versus last year and while you can imagine that all these markets will be stronger than what we realized in Q2, this is really a year-over-year growth for Q3 versus last year. For Electrical Americas, we expect organic revenues to be between down 2% and up 2%, so essentially flat. For Electrical Global, our current view is organic revenues will decline between 10% and 14% with strength in Asia-Pacific. For Aerospace, we expect organic revenues will be down between 28% and 32% with continued strength in Military offset by really significant declines in all of the commercial markets. And Vehicle, we project revenues will decline between 30% and 34%. And for eMobility, we expect declines of between 13% and 17%, once again pressured from legacy internal combustion engine platforms. And lastly, for Hydraulics, we think market will be down between 23% and 27%. Freight in overall, we're estimating Q3 revenues to be down between 13% and 17%, and so an improvement versus Q2, which was down some 20%, but still on absolute terms, where markets are still in decline. Moving to Page 14, here we provide our best look at guidance for Q3 and some commentary on the full year, but for Q3, we expect organic revenues to decline between 13% and 17% and this really does include what we know about July, where we saw low double-digit declines. For Q3 and full year, we expect decremental margins of between 25% and 30% and for Q3, we expect our tax rate on adjusted earnings to be between 15% and 16%. We're maintaining our free -- 2020 free cash flow guidance, the range of $2.3 billion to $2.7 billion and I would note that this range does in fact, include now the impact related to the multi-year restructuring program that we announced, and that was not in our prior guidance. As a point of reference, in the first half, just to give you some comfort around our ability to deliver this number, we generated some 35% of our $2.5 billion midpoint, that's in our free cash flow guidance and this number is very consistent with our performance over the last five years. We're providing new guidance for share buybacks and we're seeing between $1.7 billion and $1.9 billion for the year. And recall that we repurchase $3 billion of shares in Q1 with the proceeds in the lighting sales. We continued to deliver free strong -- strong free cash flow and we now plan to buyback between $400 million and $600 million of our share is half of the year. Our long-term goals have not changed, it include 2% to 3% organic growth, 20% segment margins, 8% to 9% earnings per share growth and $3 billion a year of free cash flow, and with our strong cash flow we'll continue to be focused and disciplined in how we deploy it.

Q2 earnings on a per share basis were $0.13 on a GAAP basis and $0.70 on adjusted basis, which excludes $0.20 of charges related to acquisitions and divestitures and $0.37 related to the multi-year restructuring program that we just announced. Our Q2 revenues were $3.9 billion, down 22% organically. As we noted on our Q1 earnings call, April was down approximately 30%, this was followed by slightly better volumes in May and then relatively strong finish in June, which was down, let's call it low double-digits. Segment margins were 14.7%, down 110 basis points from Q1 and our detrimental margins were at 25%, 5 points better than our guidance of 30%. Both very strong results and which gives us the ability to really reaffirm our free cash flow guidance of $2.3 billion to $2.7 billion and a midpoint of $2.5 billion. For Q2, revenues were down 32%, with a 30% decline organically and a 2% currency impact. We would expect to realize $200 million of mature-year benefits from these actions once they are fully implemented and we think full year implementation is 2023. And Vehicle, we project revenues will decline between 30% and 34%. For Q3 and full year, we expect decremental margins of between 25% and 30% and for Q3, we expect our tax rate on adjusted earnings to be between 15% and 16%. We're maintaining our free -- 2020 free cash flow guidance, the range of $2.3 billion to $2.7 billion and I would note that this range does in fact, include now the impact related to the multi-year restructuring program that we announced, and that was not in our prior guidance.

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The net revenue up 29% and earnings per share up 48% versus a year ago, as always, on a non-GAAP currency-neutral basis. On this same basis, Quarter 3 net revenues are now 11% above pre-COVID levels in 2019. retail sales ex auto, ex gas were up 5% versus a year ago and 12% versus 2019, reflecting the return to in-person shopping and the ongoing e-commerce strength. SpendingPulse also indicated that the overall European retail sales in Quarter 3 were up 5% and 6% versus 2019. We will, therefore, turn the page and move beyond the four-phased framework that guided us through the last 19 months and focus on managing the business for the growth opportunities ahead of us. Our cross-border travel improved from 48% of 2019 levels in the second quarter to 72% this quarter with substantial upside potential still remaining as and when borders open. And in Brazil, we signed a deal with Autopass to issue more than 10 million cards to mass transit users in the Sao Paulo area, and along with that, open, contactless acceptance across their subway trains and city buses. Earlier this month, we acquired CipherTrace, a security and fraud monitoring company with expertise, technologies and insights into more than 900 cryptocurrencies. So turning to Page 3, which shows our financial performance for the quarter on a currency-neutral basis, excluding special items and the impact of gains and losses on our equity investments. Net revenue was up 29%, reflecting the continued execution of our strategy and the ongoing recovery in spending. Acquisitions contributed 3 ppt to this growth. Operating expenses increased 23%, including an 8 ppt increase from acquisitions. Operating income was up 34% and net income was up 45%, both of which include a 1 ppt decrease related to acquisitions. Further, net income growth was also positively impacted by 6 ppt due to the recognition of higher one-time discrete U.S. tax benefits versus a year ago. EPS was up 48% year over year to $2.37, which includes $0.02 of dilution related to our recent acquisitions, offset by a $0.04 contribution from share repurchases. During the quarter, we repurchased $1.6 billion worth of stock and an additional $361 million through October 25, 2021. So now, let's turn to Page 4, where you can see the operational metrics for the third quarter. Worldwide gross dollar volume or GDV increased by 20% year over year on a local-currency basis. U.S. GDV increased by 20% with debit growth of 9% and credit growth of 36%. Outside of the U.S., volume increased 20%, with debit growth of 23% and credit growth of 16%. To put this in perspective, as a percentage of 2019 levels, GDV is at 121%, up 2 ppt sequentially, with credit at 111%, up 4 ppt sequentially, and debit at 131%, flat quarter over quarter. Cross-border volume was up 52% globally for the quarter with intra-Europe cross-border volumes up 47% and other cross-border volumes up 60%, reflecting continued improvement and the lapping of the pandemic last year. In the third quarter, cross-border volume was at 97% of 2019 levels with intra-Europe at 112% and other cross-border volume at 83% of 2019 levels. Notably, cross-border volumes averaged at or above 100% of 2019 levels in the months of August and September. Turning now to Page 5. Switched transactions grew 25% year over year in Q3 and were at 131% of 2019 levels. In Q3, contactless transactions represented 48% of in-person purchase transactions globally, up from 45% last quarter. In addition, card growth was 8%. Globally, there are 2.9 billion Mastercard and Maestro-branded cards issued. The increase in net revenue of 29% was primarily driven by domestic and cross-border transaction and volume growth, as well as strong growth in services, partially offset by higher rebates and incentives. As previously mentioned, acquisitions contributed approximately 3 ppt to net revenue growth. Domestic assessments were up 21% while worldwide GDV grew 20%. Cross-border volume fees increased 59% while cross-border volumes increased 52%. The 7 ppt difference is primarily due to favorable mix as higher-yielding ex intra-Europe cross-border volumes grew faster than intra-Europe cross-border volumes this quarter. Transaction processing fees were up 26%, generally in line with switched transaction growth of 25%. Other revenues were up 35%, including a 10 ppt contribution from acquisitions. Finally, rebates and incentives were up 34%, reflecting the strong growth in volume of transactions and new and renewed deal activity. Moving on to Page 7. You can see that on a currency-neutral basis, total operating expenses increased 23%, including an 8 ppt impact from acquisitions. Excluding acquisitions, operating expenses grew 16%, primarily due to higher personnel costs as we invest in our strategic initiatives, including -- sorry, increased spending on advertising and marketing and increased data processing costs. Turning to Page 8. So if you look at spending levels as a percentage of 2019 for switched volumes, through the first three weeks of October, the recent trends have continued with overall switched volumes at 134% of 2019 levels, up 3 ppt versus Q3. And we are now at 105% of 2019 levels. Turning to Page 9. As a reminder, spending recovered progressively in 2020, so we will be facing a more difficult comp of approximately 7 ppt in the fourth quarter relative to the third quarter. And we expect acquisitions will contribute about 2 to 3 ppt to revenue and 8 ppt to operating expense growth in Q4. Foreign exchange is expected to be about 0.5 ppt headwind to both net revenue and operating expenses in Q4. On the other income and expense line, we are at an expense run rate of approximately $120 million per quarter, given the prevailing interest rates. And finally, we expect a tax rate of approximately 18% to 19% for the fourth quarter.

Worldwide gross dollar volume or GDV increased by 20% year over year on a local-currency basis. U.S. GDV increased by 20% with debit growth of 9% and credit growth of 36%. Outside of the U.S., volume increased 20%, with debit growth of 23% and credit growth of 16%. Domestic assessments were up 21% while worldwide GDV grew 20%.

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In fact, I think over the next two years, we're going to see more change than we've seen in the past 10. During the first quarter of our fiscal year, we generated about $344 million in fee revenue, which was down about 28% in constant currency. Trailing new business for the three months ended August was down about 13% year-over-year combined, which is obviously more positive than we saw in our first quarter in what we saw when the world stopped in April. In fact, August new business was only down about 6% year-over-year. July new business was up 34% over June. We've got rewards data on over 20 million people, 25,000 companies, we've done almost 70 million assessments, we have thousands of organizational benchmark data, we've got thousands of success profiles, every year we train and develop 1 million professionals a year, and certainly last but not least is we place a candidate at each business hour, every three minutes. And that includes moving from analog to digital including in our assessment and learning business, which today it's almost 25% of the company and we're certainly shifting that business. And our goal is to develop 1 million new leaders from diverse backgrounds using our Korn Ferry Advance and Leadership U platforms. For the first quarter of fiscal year '21, our fee revenue was $344 million, down about 28% in constant currency. Consolidated fee revenue in May was down about 34% year-over-year, while June and July were down 27% and 26%, respectively. Specifically, fee revenue in the first quarter, measured at constant currency, was down 37% for Executive Search, 35% for Professional Search, our Consulting was down 26%, RPO was down 22%, and Digital was down 2%. Driven by the revenue contraction, our consolidated adjusted EBITDA for the first quarter was $10.6 million with an adjusted EBITDA margin of 3.1%, and our adjusted fully diluted loss per share was $0.19. At the end of the first quarter, cash and marketable securities totaled $733 million. Excluding amounts reserved for deferred comp and for accrued bonuses and actually net of the funds used to rightsize the firms, our investable cash balance at the end of the first quarter was about $511 million, and that's up about $150 million year-over-year. We continue to have undrawn capacity of $645 million on our revolver. So altogether, we have close to $1.2 billion in liquidity to manage our way through the COVID-19 crisis and to invest back into the business through the recovery. Last, we had about $400 million in outstanding debt at the end of the quarter. Combined with the actions completed in the first quarter, we have initially reduced our cost base by about $321 million annually. Global fee revenue for KF Digital was $56 million in the first quarter and down approximately $2 million or 2% year-over-year measured at constant currency. The subscription and licensing component of KF Digital fee revenue in the first quarter was approximately $21 million, which was up $6 million year-over-year and flat sequentially. New business in the first quarter for the Digital segment was down approximately 3% globally year-over-year at constant currency with the subscription and licensing component up approximately 40%. Adjusted EBITDA in the first quarter for KF Digital was $7.9 million with a 14.2% adjusted EBITDA margin. In the first quarter, Consulting generated $99 million of fee revenue, which was down approximately 26% year-over-year at constant currency. Measured year-over-year at constant currency, new business in the first quarter for our Consulting segment was down approximately 4%, led by North America, where new business was up 11% year-over-year. Adjusted EBITDA for Consulting in the first quarter was $6.6 million with an adjusted EBITDA margin of 6.6%. RPO and Professional Search generated global fee revenue of $68 million in the first quarter, which was down 27% year-over-year at constant currency. RPO fee revenue was down approximately 22%, and Professional Search fee revenue was down approximately 35% year-over-year measured at constant currency. Adjusted EBITDA for RPO and Professional Search in the first quarter was $6 million with an adjusted EBITDA margin of 8.8%. Finally, for the Executive Search, global fee revenue in the first quarter of fiscal '21 was approximately $120 million, which compared year-over-year and measured at constant currency was down approximately 37%. At constant currency, North America was down 38%, while both EMEA and APAC were down 35%. The total number of dedicated Executive Search consultants worldwide at the end of the first quarter was 510, down 59 year-over-year and down 46 sequentially. Annualized fee revenue production per consultant in the first quarter was $900,000 and the number of new assignments opened worldwide in the first quarter was 1,115, which was down approximately 34% year-over-year, but up 9% sequentially. Adjusted EBITDA for Executive Search in the first quarter was approximately $8.1 million with an adjusted EBITDA margin of 6.7%. Excluding new business awards for RPO, global new business measured year-over-year was down approximately 31% in May, down 25% in June, rebounding to down 5% in July. Measured sequentially, June new business was up 17% over May and July new business was up 34% compared to June. Measured year-over-year, August new business was stable and down about 6%, which is in line with what we saw in July. Digital new business was up 3% year-over-year in June, down 5% year-over-year in July and up 10% in August. Likewise, Consulting new business was down 28% year-over-year in June, rebounding to up 34% in July and up 10% in August. For Executive Search, new business was down 34% year-over-year in June, improving to down 27% in July and was down 19% in August. And finally, Professional Search new business was down 15% year-over-year, falling to down 23% in July and August. With regards to RPO, a strong quarter of new business with $56 million of global awards and that was comprised of $32 million of new clients and $24 million of renewals and extensions. And consistent with our approach in the last two earnings calls, we will not issue any specific revenue or earnings guidance for the second quarter of fiscal year '21.

Driven by the revenue contraction, our consolidated adjusted EBITDA for the first quarter was $10.6 million with an adjusted EBITDA margin of 3.1%, and our adjusted fully diluted loss per share was $0.19. And consistent with our approach in the last two earnings calls, we will not issue any specific revenue or earnings guidance for the second quarter of fiscal year '21.

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Overall, for the company, revenue was up 29% to a new first quarter record of $931 million. At constant currency, revenue was up 28%. GAAP operating income was a first quarter record $114 million, up 213%. GAAP earnings per share from continuing operations was a first quarter record $2.20, up 588%. Total segment profit rose 208% to a first quarter record of $116 million. Total segment margin expanded 720 basis points to 12.4%, and adjusted points to 12.4%, and adjusted earnings per share from continuing operations rose 305% to a first quarter record $2.27. Residential revenue was up 37%. Segment profit rose 197% and segment margin expanded 850 basis points to 15.9%. Replacement business was up more than 40% and new construction was up more than 25%. Breaking it down between our Lennox business and our Allied business, Lennox revenue was up about 25%, and Allied was up about 70%. Second, Residential benefited from the colder winter weather with heating degree days up 13% from the first quarter last year. Third, I'd like to note that we had -- I would like to note that we had a 6% benefit to revenue for more days in the quarter this year than last year. Conversely, the fourth quarter will have a 6% headwind from fewer days in the quarter this year. Adjusting for the days, Residential grew 31% with Lennox growing nearly 20% and Allied growing about 65%. In addition, for Allied, we had approximately $25 million of pull-forward in the first quarter from different distributor loading patterns this year than last year. Adjusted for both days and this pull-forward, Allied was up approximately 35% in the quarter. Working through all this math I gave, adjusting for days and the pull-forward in our Allied business which sells to independent distribution, overall Residential segment revenue was up about 25%. Revenue is up 12%. At constant currency, revenue was up 11%. Segment profit was up 47% and segment margin expanded 330 basis points to 13.8%. Today, K-12 schools are just a little under 10% of revenue for this -- equipment revenue for this segment. This business is up more than 20% for us in the first quarter. Most interest and activity we are seeing are in this K-12 school segment but conversations are taking place with many customers across many industry verticals. In Refrigeration for the first quarter, revenue was up 21%. At constant currency, revenue is up 17%. In North America, revenue was up more than 25%. Refrigeration segment margin expanded 560 basis points to 6.3%. The segment profit rose to $8 million from $1 million in the prior year quarter. We now expect 7% to 11% revenue growth and adjusted earnings per share from continuing operations of $11.40 to $12. We are also raising free cash flow guidance to $375 million for the full year. We now assume about 55% of earnings in the first half of the year compared to the prior guidance of about 50%. We repurchased $200 million of stock in the first quarter and plan on another $200 million for a total of $400 million in our guidance for the year. In the quarter, revenue from Residential Heating & Cooling was a first quarter record $606 million, up 37%. Volume was up 32%. Price was up 1% and mix was up 4%. Residential profit was a first quarter record $96 million, up 197%. Segment margin expanded 850 basis points to 15.9%. In the first quarter, Commercial revenue was a first quarter record $199 million, up 12%. Volume was up 15%. Price was flat and mix was down 4%. Foreign exchange had a positive 1% impact to revenue growth. Commercial segment profit was a first quarter record $27 million, up 47%. Segment margin was a first quarter record 13.8%, which was up 330 basis points. In Refrigeration, revenue was $125 million, up 21%. Volume was up 15%. Price was up 1% and mix was up 1%. Foreign exchange had a positive 4% impact to revenue growth. Refrigeration segment profit was $8 million in the first quarter compared to $1 million in the prior year quarter. Segment margin was 6.3%, up 560 basis points. Regarding special items in the first quarter, the company had net after-tax charges of $2.7 million that included a $2 million net charge for other tax items, a $1.9 million net charge in total for various other items and a $1.2 million benefit for excess tax benefits from share-based compensation. Corporate expenses were $16 million in the first quarter compared to $14 million in the prior year quarter. Overall, SG&A was $145 million compared to $131 million in the prior year quarter. SG&A was down as a percent of revenue to 15.6% from 18.1% in the prior quarter. In the first quarter, the company used $18 million in cash from operations compared to a usage of $99 million in the prior year quarter. Capital expenditures were approximately 25 -- $24 million in the first quarter and in the prior year quarter. Free cash flow was a negative $42 million in the first quarter compared to a negative $123 million in the prior quarter. The company paid approximately $30 million in dividends in the quarter and repurchased $200 million of stock. Total debt was $1.17 billion at the end of the first quarter and we ended the quarter with a debt-to-EBITDA ratio of 1.8. Cash, cash equivalents and short-term investments were $40 million at the end of the first quarter. For the company, we are raising guidance for 2021 revenue growth from a 48% range to a new range of 7% to 11%, and we still expect foreign exchange to be neutral to revenue for the full year. We are raising guidance for 2021 GAAP earnings per share from continuing operations from a range of $10.55 to $11.15 to a new range of $11.33 to $11.93, and we are raising our 2021 adjusted earnings per share from continuing operations from $10.55 to $11.15 to a new range of $11.40 to $12. We have announced a second round of price increases and now expect a benefit of $90 million in price for the year, up from our prior guidance of $50 million. We now expect residential mix of $10 million, up from our prior guidance for neutral mix. We expect a benefit of $15 million from sourcing and engineering-led cost reduction actions, down from our prior guidance of $25 million. For commodities, we now expect a $55 million headwind, up from our prior guidance of $30 million. Corporate expenses are now expected to be approximately $95 million, up from prior guidance of $90 million, primarily due to higher incentive compensation. We still expect a $20 million benefit from factory productivity. With 30 new Lennox Stores planned for this year, we will be at a more normal run rate with distribution investments compared to last year. Freight is still expected to be a $5 million headwind and tariffs are also expected to be a $5 million headwind. We are planning for SG&A to be up approximately 7% for the year or a headwind of about $45 million. We still expect interest and pension expense to be approximately $35 million. We continue to expect an effective tax rate of approximately 21% on an adjusted basis for the full year. We are still planning capital expenditures to be approximately $135 million this year, about $30 million of which is for the third plant at our campus in Mexico. We expect construction to be completed at the end of 2021 and have the plant fully operational by mid-2022, and we expect nearly $10 million in annual savings from the third plant. Free cash flow is now targeted to be approximately $375 million for the full year, up from prior guidance of approximately $325 million on the strong earnings performance in the first quarter and our current outlook. And finally, we still expect the weighted average diluted share count for the full year to be between 37 million to 38 million shares, which incorporates our plans to repurchase $400 million of stock this year.

Overall, for the company, revenue was up 29% to a new first quarter record of $931 million. GAAP earnings per share from continuing operations was a first quarter record $2.20, up 588%. Total segment margin expanded 720 basis points to 12.4%, and adjusted points to 12.4%, and adjusted earnings per share from continuing operations rose 305% to a first quarter record $2.27. We now expect 7% to 11% revenue growth and adjusted earnings per share from continuing operations of $11.40 to $12. We are raising guidance for 2021 GAAP earnings per share from continuing operations from a range of $10.55 to $11.15 to a new range of $11.33 to $11.93, and we are raising our 2021 adjusted earnings per share from continuing operations from $10.55 to $11.15 to a new range of $11.40 to $12. Free cash flow is now targeted to be approximately $375 million for the full year, up from prior guidance of approximately $325 million on the strong earnings performance in the first quarter and our current outlook.

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Yesterday, we announced third quarter 2021 earnings of $1.65 per share. Our earnings were up $0.18 per share from the same time period in 2020. Our 2021 earnings guidance range is now $3.75 per share to $3.95 per share compared to our original guidance range of $3.65 per share to $3.85 per share. In late March, Ameren Missouri filed a request for a $299 million increase in annual electric service revenues and a $9 million increase in annual natural gas service revenues with the Missouri Public Service Commission. In our Illinois Electric business, we have requested a $59 million base rate increase in our required annual electric distribution rate filing. As we have discussed with you in the past, MISO completed a study outlining the potential road map of transmission projects through 2039. Under MISOs Future one scenario, which is the scenario that resulted in an approximate 60% carbon emissions reduction below 2005 levels by 2039 and MISO estimates approximately $30 billion of future transmission investment would be necessary in the MISO footprint. Under its Future three scenario, which resulted in an 80% reduction in carbon emissions below 2005 levels by 2039, MISO estimates approximately $100 million of transmission investment in the MISO footprint would be needed. Beginning with environmental stewardship, last September, Ameren announced its transformation plan to achieve net-zero carbon emissions by 2050 across all of our operations in Missouri and Illinois. This plan includes interim carbon emission reduction targets of 50% and 85% below 2005 levels in 2030 and 2040, respectively, and is consistent with the objectives of the Paris Agreement and limiting global temperature rise to 1.5 degrees Celsius. Turning to page 10, you will go down further on this key element. Our strong sustainable growth proposition is driven by a robust pipeline of investment opportunities over $40 billion over the next decade that will deliver significant value to all of our stakeholders and making our energy grid stronger, smarter and cleaner. Our outlook through 2030 does not include significant infrastructure investments for electrification at this time. Moving to page 11. Another key element of our sustainable growth proposition is the five-year earnings-per-share growth guidance we issued in February, which included a 6% to 8% compound annual earnings-per-share growth rate from 2021 to 2025. Importantly, our five-year earnings and rate base growth projections do not include 1,200 megawatts of incremental renewable investment opportunities outlined in Ameren Missouris Integrated Resource Plan. Finally, turning to page 12. And during the past 20 years, Marty has demonstrated strong operational, financial, regulatory and strategic acumen. Yesterday, we reported third quarter 2021 earnings of $1.65 per share compared to $1.47 per share for the year ago quarter. Turning to Ameren Missouri, our largest segment increased $0.27 per share, driven primarily by a change in seasonal electric rate design, resulting from the March 2020 rate order, which provided for lower winter rates in May and higher summer rates in September rather than the blended rates used in both months in 2020. Higher electric retail sales also increased earnings by approximately $0.10 per share largely due to continued economic recovery in this years third quarter compared to the unfavorable impacts of COVID-19 in the year ago period as well as higher electric retail sales driven by warmer-than-normal summer temperatures in the period compared to near-normal summer temperatures in the year-ago period. Increased investments in infrastructure and wind generation eligible for plant and service accounting and the renewable energy standard rate adjustment mechanism, or RESRAM, positively impacted earnings by $0.07 per share. The timing of tax expense, which is not expected to materially impact full year results increased earnings by $0.03 per share. Higher operations and maintenance expense decreased earnings by $0.04 per share in 2021 compared to the third quarter of 2020, which was affected by COVID-19 and remained flat year-to-date driven by disciplined cost management. Finally, the amortization of deferred income taxes related to the fall 2020 Callaway Energy Center scheduled refueling and maintenance outage also decreased earnings $0.02 per share. Ameren Transmission earnings increased $0.03 per share year-over-year, reflecting increased infrastructure investment. Earnings for Ameren Illinois Natural Gas decreased $0.04 per share. Ameren parent and other results decreased $0.08 per share compared to the third quarter of 2020, primarily due to the timing of income tax expense, which is not expected to materially impact full year results. Weather-normalized kilowatt hour sales to Illinois residential customers decreased 0.5%. And weather-normalized kilowatt hour sales to Illinois commercial and industrial customers increased 2.5% and 1.5%, respectively. Turning to page 15. As Warner noted, due to the solid execution of our strategy, we now expect 2021 diluted earnings to be in the range of $3.75 per share to $3.95 per share, an increase from our original guidance range of $3.65 per share to $3.85 per share. Moving to page 16 for an update on regulatory matters. On March 31, we filed for a $299 million electric revenue increase with the Missouri Public Service Commission. The request includes a 9.9% return on equity, a 51.9% equity ratio and a September 30, 2021 estimated rate base of $10 billion. Missouri PSC staff recommended a $188 million revenue increase including a return on equity range of 9.25% to 9.75% and an equity ratio of 50% based on Ameren Missouris capital structure at June 30, 2021, which will be updated to use the capital structure as of September 30, 2021. Turning to Page 17. In addition to the electric filing on March 31, we filed for a $9 million natural gas revenue increase within the Missouri PSC. The request includes a 9.8% return on equity, a 51.9% equity ratio and a September 30, 2021 estimated rate base of $310 million. Missouri PSC staff recommended a $4 million revenue increase, including a return on equity range of 9.25% to 9.75% and an equity ratio of 50.32% based on Ameren Missouris capital structure at June 30, 2021, which will be updated to use of the cash flow structure as of September 30, 2021. Moving to page 18, Ameren Illinois regulatory matters. In August, the ICC staff recommended a $58 million base rate increase compared to our request of $59 million base rate increase. Turning now to Page 19. The return on equity, which will be determined by the Illinois Commerce Commission, may impacted by plus or minus 20 to 60 basis points based on the utilitys ability to meet certain performance metrics related to items such as reliability, customer service and supplier diversity. The plan also allows for the use of year-end rate base and an equity ratio up to 50% with an higher equity ratio subject to approval by the ICC. Theres a cap on the true-up, which may not exceed 105% of the revenue requirement and excludes variation from certain forecasted costs. The legislation also allows for two utility-owned solar and/or battery storage pilot projects to be located near Peoria and East St. Louis at a cost not to exceed $20 million each. Moving to page 20 for a financing update. In order for us to maintain our credit earnings and a strong balance sheet while we fund our robust infrastructure plan and consistent with prior guidance as of August 15, we have completed the issuance of approximately $150 million of common equity through our at-the-market or ATM program that was established in May. Further, approximately $30 million of equity outlined for 2022 have been sold year-to-date under the programs forward sales agreement. Together with the issuance under our 401(k) and DRPlus program, our $750 million ATM equity program is expected to support equity needs through 2023. Moving now to page 21. Beginning with our natural gas business, heading into the winter season, Ameren is approximately 75% hedged, and Ameren Missouri is approximately 85% hedged based on normal seasonal sales. Approximately 60% of Illinois winter supply of natural gas was bought this summer at lower prices and is being stored in the companys 12 underground storage fields. Both companies are 100% volumetrically hedged based on maximum seasonal sales. Turning to page 22. As a result, we expect energy efficiency performance incentives to be approximately $0.04 per share higher than 2021. Further, our return to normal weather in 2022 would decrease Ameren Missouri earnings by approximately $0.04 compared to 2021 results to date, assuming normal weather in the last quarter of the year. The allowed ROE under the formula will be the average 2022 30-year treasury yield plus 5.8%. For Ameren Illinois Natural Gas, earnings are expected to benefit from new delivery service rates effective late January 2021 as well as an increase in infrastructure investments qualifying for rider treatment that were in the current allowed ROE of 9.67%. And Lastly, turning to page 23, were well positioned to continue executing our plan.

Our 2021 earnings guidance range is now $3.75 per share to $3.95 per share compared to our original guidance range of $3.65 per share to $3.85 per share.

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Gross profit increased 53% from last year's first quarter. Net income increased 228% to $43 million or diluted earnings per share of $0.90, compared with net income of $30 million or diluted earnings per share of $0.27 a year ago. Net sales decreased $29.7 million or 3% to $1.88 billion, compared with the prior year period with favorable exchange rates benefiting net sales by $16 million. Adjusted gross profit increased 39% to $107 million, and our adjusted gross profit margin increased to 10%, compared with 7% in the prior year period. However, I would like to point out that if you apply the adjusted gross profit margin for the fresh and value-added produce segment of 8.7% to the $19 million of net sales impacted by COVID-19 in this segment, we estimate we would have delivered an additional $1.7 million in adjusted gross profit. Adjusted operating income increased 140% to $58 million compared with the prior year period, mostly driven by increased gross profit. And adjusted net income increased 154% to $42 million compared with the prior year period. We achieved a diluted earnings per share of $0.90, compared to diluted earnings per share of $0.27 in the prior year period. Excluding nonoperational and nonrecurring items, we delivered adjusted diluted earnings per share of $0.88, compared with adjusted diluted earnings per share of $0.34 in the prior year period. Adjusted EBITDA increased 61%, and adjusted EBITDA margin increased 300 basis points when compared with the prior year period. For the first quarter of 2021, net sales decreased $30 million or 5% compared with the prior year period. For the quarter, adjusted gross profit in our fresh and value-added product segment increased 9% to $55 million, and adjusted gross profit margin increased 100 basis points. We also pursued volume expansion during the quarter in the following product lines: pineapple volume increased 22% and avocado volume increased 12%. Gross profit in our non-tropical product line decreased primarily in rates as a result of damage caused by severe rainstorms to some of our farms in Chile, which resulted in a $3.1 million inventory write-off. Net sales in our banana segment decreased $9 million to $418 million while adjusted gross profit increased 93% or $23 million during the quarter, primarily driven by lower net sales in North America and the Middle East, mainly as a result of decreased sales volume, partially offset by strong demand in Asia. Overall volume decreased 8%. Pricing increased 7%, which offset an increase in production and procurement costs due to the impact of hurricanes Eta and Iota in Guatemala as well as inflationary pressure on cost of goods sold. Selling, general, and administrative expenses decreased $4 million to $49 million, compared with $53 million in the prior year period. The foreign currency impact at the gross profit level for the first quarter was favorable by $13 million, compared with an unfavorable effect of $6 million in the prior year period. Interest expense net for the first quarter at $5 million was in line with the prior year period. The provision for income taxes was $11 million during the quarter, compared with the income tax of $300,000 in the prior year period. The increase in the provision was due to -- sorry, the increase in the provision for income tax of $10.7 million is primarily due to increased earnings in certain jurisdictions. During the quarter, we generated $47 million in cash flow from operating activities, compared to $2 million in the prior year period. As it relates to capital spending, we invested $34 million in the first quarter, compared with $17 million in the prior year period. As of the end of the quarter, we received cash proceeds of $42.4 million in connection with our asset sales under the asset optimization program of which approximately $40 million was received in 2020. We believe we're on track to achieve the $100 million program by the first quarter of 2022. We paid down our long-term debt by $8 million, resulting in a total debt balance of $534 million. And based on our trailing 12 months, our total debt to adjusted EBITDA ratio stands at 2.4 times.

Net income increased 228% to $43 million or diluted earnings per share of $0.90, compared with net income of $30 million or diluted earnings per share of $0.27 a year ago. We achieved a diluted earnings per share of $0.90, compared to diluted earnings per share of $0.27 in the prior year period. Excluding nonoperational and nonrecurring items, we delivered adjusted diluted earnings per share of $0.88, compared with adjusted diluted earnings per share of $0.34 in the prior year period.

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Second quarter were up 3% versus a year ago and up 7% sequentially from the first quarter. We incurred $14.8 million in restructuring expense and expect annualized savings of approximately $8 million once the restructuring activities are completed over the next 12 months. Excluding the impact from our restructuring actions, gross margin was up 30 basis points from the prior year as lower raw material costs, including benefits from our procurement initiatives more than offset the increasing pressure from an unavoidable mix of sales. With continuing momentum, we expect full year sales to be up 5% to 8% over 2020, including favorability from FX of about 3%. We're also projecting adjusted operating margin to increase 60 to 100 basis points, driven largely by gross margin strength. We had solid cash conversion during second quarter, and our balance sheet is in good shape with our net debt to EBITDA ratio sitting at 0.7 times. Total second quarter sales were up 2.6% from the prior year or 0.2% in local currency. Total Engine segment sales rose over 6%, and Industrial was down 4%. Within Off-Road, our second quarter sales in China were up about 70%. On-Road sales were down about 1% in the quarter, which is our best year-over-year result since fiscal 2019, signaling to us that the second quarter was the cyclical trough in this business. Second quarter sales of Aftermarket were up over 7% year-over-year, and they were also up 4% sequentially from the first quarter, which is atypical and serves as another indicator that market conditions are improving. In China, second quarter sales of Engine Aftermarket were up over 30%. Overall, PowerCore sales increased about 9% in second quarter with strong growth in both first-fit and replacement parts. Aerospace and Defense, which represents about 3% of our business, faced another tough quarter due primarily to the ongoing pandemic-related weakness in commercial aerospace while sales for helicopters continue to perform well. Second quarter sales were down about 4%, including a 3% benefit from currency. We launched LifeTec five years ago with fewer than 10 salespeople, and we're on track to be over 100 by the end of this fiscal year. Sales of Gas Turbine Systems, or GTS, were down 3.5% in second quarter as large project deliveries, though a smaller part of our business, were less than the prior year. Sales were up 2.6% from the prior year, and adjusted operating income grew 7.6%. The projects we initiated in the second quarter should generate annual savings of about $8 million once fully implemented with about $1 million realized in this fiscal year. These actions drove a second quarter charge of $14.8 million and resulted in an operating margin headwind of about 220 basis points and an earnings per share impact of $0.08. As I said earlier, adjusted operating profit, which excludes restructuring charges, was up 7.6% from the prior year. That translates to an adjusted operating margin of 13.4%, which is 60 basis points up from the prior year. Second quarter adjusted gross margin grew 30 basis points to 34%, accounting for half the operating margin increase. As a rate of sales, second quarter adjusted operating expense was 30 basis points favorable versus the prior year, continued benefits from lower discretionary expenses due in part to the pandemic-related restrictions were partially offset by higher incentive compensation. If you exclude restructuring charges, the second quarter Industrial profit rate was down about 50 basis points from the prior year, reflecting incremental investments in businesses like Process Filtration and Venting Solutions. We invested about $12 million in the second quarter, which is down more than 70% from the prior year. We returned more than $57 million to shareholders through dividends and share repurchase, bringing our year-to-date total to almost $100 million. We have increased our dividend each calendar year for the past 25 years, making us part of the elite group included in the S&P High Yield Dividend Aristocrat index. Our position on the dividend is the same as it was 65 years ago when we began paying it every quarter. With this in mind, we expect sales this year to return to a pattern that is generally in line with our typical seasonality, where about 52% of our full year revenue occurs in the back half. Therefore, we expect full year sales will increase between 5% to 8%, which includes the benefit from currency translation of about 3%. In the Engine segment, full year sales are projected to increase between 8% and 12% with our first-fit business comprising a bigger piece of the recovery story in the back half. We expect full year Off-Road sales to increase in the low 20% range with building strength in commodity prices driving an acceleration in equipment production in agriculture and other select markets. In the Industrial segment, full year sales are projected to be between a 2% decline and a 2% increase as recovery in the capital investment environment is still emerging. At a company level, we are expecting an adjusted operating margin to increase to within a range of 13.8% and 14.2% compared to 13.2% in 2020. This implies a sequential step up in our operating margin to 14.4% for the back half of the year and aligns with our commitment to increasing profitability on increasing sales. Additionally, we expect to maintain a disciplined approach to our operating expenses and deliver further leverage in the back half of the year despite an expected full year headwind of approximately $20 million from increased incentive compensation, about 2/3 of which is in the back half of the fiscal year. For our other operating metrics, we expect interest expense of about $13 million, other income of $2 million to $4 million, and a tax rate between 24% and 25%. Taking the midpoint of our sales and capex guidance for 2021 would put it at just over 2% of sales. We expect to repurchase 1% to 2% of our outstanding shares. Finally, our cash conversion was very good in the first half, and we continue to expect to exceed 100%, reflecting strong first half conversion and anticipated increases in working capital later in the fiscal year. It's a straightforward plan, and it has served us well for 106 years, giving me confidence we are in an excellent position to deliver a strong finish to fiscal 2021.

With continuing momentum, we expect full year sales to be up 5% to 8% over 2020, including favorability from FX of about 3%. These actions drove a second quarter charge of $14.8 million and resulted in an operating margin headwind of about 220 basis points and an earnings per share impact of $0.08. Therefore, we expect full year sales will increase between 5% to 8%, which includes the benefit from currency translation of about 3%.

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Earlier today, we reported the highest adjusted third-quarter earnings in company history at $11.21 per share, a 63% over last year's strong results. Record revenues of $6.2 billion were primarily driven by successful navigation of the abnormal supply and demand environment and contributions from acquired businesses. During the quarter, total revenue grew 70%, while total gross profit increased 83%. On a same-store basis, used vehicles let our revenue growth up 40%, followed by a 22% increase in F&I income, a 7% increase in Service, Body and Parts revenues, and a relatively modest 3% decrease in new-vehicle revenues. Additionally, same-store gross profit increased 23%. In the third quarter, we generated $530 million in adjusted EBITDA, greater than any full-year in our history before 2019, providing us additional capital to deploy toward network expansion and Driveway, while also accelerating our continued exploration into adjacencies. Our plan to reach $50 billion in revenue and exceed $50 in earnings per share by the year 2025 from here on referred to as our 2025 plan, was designed with these and other consumer trends in mind. Beyond the Lithia & Driveway channels, are complex, expansive, and difficult to replicate design that we have incrementally unveiled over the past 15 months, today includes green cars, the foremost educational marketplace for sustainable vehicles, a quickly growing FinTech Driveway Finance, growing fleet in leasing operations, and a Canadian presence to establish the seeds for international growth, longer term. For the third quarter, these Lithia websites and associated online shopping experiences connected with 11.5 million quarterly unique visitors. These Lithia e-commerce customers accounted for 36,600 or 25% of all units retailed in the quarter, and simply estimated at $5.9 billion of annualized revenues attributed to the e-commerce portion of our traditional Lithia channel. To put this into perspective, these e-commerce sales as a percentage of monthly unique visitors, represents a 0.32% or what we call a golden ratio. To further illustrate the strength of our omnichannel strategy, when our LAD total sales are compared to unique visitors from all channels, our golden ratio was 1.46%, nearly 5 times more successful than our digital used-only peers. Internally, we view the 2025 plan as a base case and our leaders are focused on taking our execution to the next level and de-linking $1 billion of revenue to produce more than $1 of EPS. Key drivers of this are no further equity capital raises meaning no further dilution to EPS, leveraging our underutilized network to support a 2 times to 3 times increase in vehicle sales, and a 4 times increase in parts and service sales through the existing network. During the quarter, DFC originated 6,200 loans, and now has a portfolio of $530 million. Important to note is that a loan originated with Driveway Finance earns 3 times the amount earned when we arrange financing with a third-party lender on a fully discounted basis. We believe that Driveway Finance can penetrate 20% of refinanced [Phonetic] retail unit sales. Driveway generated over 530,000 monthly unique visitors in September, a 68% increase over June. 96% of our customers were incremental and had never a transaction with Lithia or Driveway before. Monthly shop transactions increased 86% during the quarter. Strong Google and Facebook reviews and a net promoter score of 90 indicate Driveway is building an online reputation for exceeding consumer expectations for a fully digital, frictionless experience. We recently launched Driveway marketing in Las Vegas and Phoenix, our 9th and 10 markets. Driveway is on track for its 2021 target of 15,000 annual transaction run rate exiting December. Looking forward to '22, we are forecasting 40,000 transactions with a 2.2 to 1 sell-to-shop ratio. In our future state, we expect our optimal physical network to be approximately 500 stores across the US, placing us within 100 miles of all US consumers. While several large deals were announced recently, the automotive retail industry remains highly fragmented and unconsolidated with the market share of the 10 largest groups at only about 10%. We have nearly $1.5 billion in annual revenue commitments as well as over $12 billion in the pipeline, which excludes our peers' large transactions. We remain confident in our ability to find deals that best fit our regional network strategy and are priced at our disciplined 15% to 30% of revenues, and 3 times to 7 times EBITDA. This ensures we meet our after-tax return threshold of 15% in a post-pandemic profit environment. Lithia and Driveway are known in the industry as the buyer of choice, obtaining manufacturer approval, timely in certain closing of transactions, and retaining over 95% of the employees. During the quarter, we completed acquisitions that are expected to generate $1.7 billion in annualized revenues, and year-to-date, we have completed $6.2 billion. We also expanded our US footprint, particularly in the Southeast Region 6, entering the Atlanta, Georgia and Mobile, Alabama markets. We have grown exponentially, while maintaining industry low leverage of around 2 times, for nearly a decade. This includes ensuring that our 22,000 associates continue to lead the digital transformation of automotive retail in their respective markets, while exceeding customer expectations, increasing market share, and improving profitability. As a result, same-store new vehicle unit sales decreased 3% in revenue and 14% in units, consistent with the nationwide SAAR decrease. We were able to offset the decreased volume with higher total variable GPUs, averaging $7,446 in the third quarter compared to $6,082 in the second quarter of 2021, and $4,754 in the prior year. As of September 30, we had a 24 days supply of new vehicles on the ground, which excludes in-transits. While the new vehicle day supply environment was challenging, our 58 days supply of used vehicle inventory exiting June 2021 positioned us well for the third quarter, where we saw a 40% increase in revenue on a 13% increase in units. Our 1,000-plus procurement personnel did excellent work sourcing vehicles, enabling us to offer customers a wide spectrum of vehicles, meaning all levels of affordability. We currently sit at a 48 days supply of used units and anticipate we will be able to continue to mitigate pressure on the new vehicle supply by maintaining solid used car comps and strong profitability. In the third quarter, we saw a 74% of our used vehicles direct from consumer, such as trade-ins and off-lease, where we as top-of-funnel franchise dealers get first look at the used vehicle inventory pipeline. Only 26% of our vehicles were procured from other channels such as auctions, other dealers, or wholesalers. During the third quarter, we earned $3,897 in gross profit on used-vehicle sourced from customer channels, which turns in an average of 33 days. For used vehicle sourced from other channels, on the other hand, we earned $2,696 in gross profit per unit, and those turned in an average of 51 days, which again, demonstrates the benefits of an omnichannel strategy for Lithia & Driveway. We offer vehicles that meet all affordability levels, but the largest number of bulk manufacturer certified pre-owned vehicles and those priced under $10,000, or are over 10 years old. Additionally, our internal dealer trade network, which creates an opportunity for our own network to have first shot at the 100,000 units we wholesale annually, allows us to cost-effectively move vehicles to better match supply and demand, and increase our retail versus wholesale mix. Same-store revenues increased 7.3% over last year. We believe that these actions reduce our normalized SG&A levels at least 300 basis points below pre-COVID levels, or to approximately 65% of gross profit. For the quarter, we generated over $530 million of adjusted EBITDA, a 104% 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 $1.7 billion in cash and available credit, which if deployed to support network growth, could purchase up to $6.8 billion in annualized revenues. As of September 30, we have $3.8 billion outstanding in debt, of which $1 billion was floor plan and used vehicle and service loaner financing. The remaining portion of our debt primarily relates to senior notes and financed real estate as we own over 85% of our physical network. Our disciplined approach is to maintain leverage between 2 times and 3 times as part of our commitment to obtaining an investment-grade credit rating, which would be another sizable competitive advantage once obtained. As of quarter-end, our ratio of net debt to adjusted EBITDA is 1.25 times. We target 65% investment in acquisitions, 25% internal investment including capital expenditures, modernization and diversification, and 10% in shareholder return in the form of dividends and share repurchases. With capital raises completed earlier this year and elevated free cash flows generated as a result of the current environment, we accelerated our investment in Driveway and DFC, incurring over $50 million in SG&A and capital expenditures, year-to-date. The personnel cost for our over 500 associates who support the scaling and continued build-out of Driveway and DFC; the marketing investment for Driveway; and IT development cost, or current period headwinds. We are well-positioned for accelerated, disciplined growth on the path toward achieving our plan to reach $50 billion of revenue and exceed $50 of earnings per share by the year 2025.

Earlier today, we reported the highest adjusted third-quarter earnings in company history at $11.21 per share, a 63% over last year's strong results. During the quarter, total revenue grew 70%, while total gross profit increased 83%. During the quarter, we completed acquisitions that are expected to generate $1.7 billion in annualized revenues, and year-to-date, we have completed $6.2 billion.

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In fact, Range's cash margin of approximately $1 per Mcfe for the first half of the year is roughly double where we were last year. Given the improved fundamental backdrop for NGLs with approximately 65% of our activity in the liquids-rich window this year, Range is very well positioned to continue to benefit. In the second quarter, Range produced $177 million in cash flow with capital spending coming in at just $120 million for the quarter, Range generated solid free cash flow despite seasonally weak pricing and the second quarter being the high point of capital spending for the year. Taking this level of efficiency and combining it with strong recoveries, a shallow base decline of under 20%, a sizable inventory and liquids optionality, Range has what we believe is an unmatched foundation for generating sustainable free cash flow for the long term. For context, Range's 2021 activity of approximately 60 wells is just a fraction of our 2,000 Marcellus locations with EURs that are greater than two Bcfe per 1,000 foot of lateral. As we look back on the second quarter, all-in capital came in at $120 million, with drilling and completion spending of approximately $116 million. Capital spend for the first half of the year totaled $226 million or approximately 53% of our annual plan. Looking forward, consistent with our activity forecast for the second half of the year, the remainder of our capital spending is expected to taper through year-end, in line with our activity forecast previously communicated and placing us at or below our all-in budget of $425 million. Production for the quarter closed out at 2.1 Bcf equivalent per day. Our activity resulted in 25 wells being turned to sales with 75% of the turn-in-line activity landing in the back half of the quarter, setting us up for higher sequential production for the balance of this year. And lastly, production from this pad was comprised of approximately 50% liquids from an average lateral length of just under 14,000 feet, and aligns with our liquids marketing results we will cover later in this section. Average lateral lengths for the wells drilled in Q2 was approximately 12,000 feet with five wells exceeding 16,500 feet. Similar to updates from prior quarters, we returned to pad sites for a significant portion of our activity in Q2, with approximately 75% of our new wells drilled on pads with existing production. As an example, in the first half of 2021, we've seen a 10% reduction in average drilling cost per lateral foot versus full year 2020, which fell below $200 per foot. On the completion side, the team completed 20 wells with a total lateral footage of more than 225,000 feet with an average horizontal length of approximately 11,300 feet per well, including four wells with lateral lengths exceeding 18,000 feet per well. The team successfully executed over 1,100 frac stages in the second quarter, while hydraulic fracturing efficiencies in the first half of the year increased by more than 6% versus the same time period a year ago. And as a result, completion costs were reduced by over $1.6 million for the second quarter. The continued success of our water operations, along with the efficiencies captured by the completions team has reduced our overall water costs for the first half of the year by just under $7 million or $15 per foot less in cost. And it represents a 28% improvement in water costs versus the same time last year. Water savings can vary each quarter, depending on the location of our operations, but generating these types of cost reductions has become a repeatable part of our program, and it aids in our ability to deliver at or below our 2021 drill and complete cost per foot target of $570 per foot. With the winter behind us, lease operating expenses for the quarter closed out at $0.10 per Mcf equivalent and are projected to remain at a similar level for the remainder of the year. As a result of these tightening fundamentals and the corresponding improvement in prices throughout the quarter, Range's NGL price was $27.92 per barrel, a $2.24 premium to Mont Belvieu. Range's premium NGL differential remains an expected positive $0.50 to $2 per barrel for the full year, showing the benefit of our diversified NGL portfolio and access to international markets. On the condensate side, realized price for the second quarter was $57.60, a differential of $8.36 per barrel. With operators administering capital and production discipline this year, ongoing strength in LNG exports at 11 Bcf per day and overall storage levels running below the five year average, an undersupplied market has materialized, further impacting 2021 pricing and movement in the forward curve above $3 for 2022. As we look at the second quarter, Range reported a Q2 natural gas differential of $0.39 under NYMEX, including basis hedging. Our relentless focus on expenditures that drive cash flow in addition to diversity in sales points for natural gas, natural gas liquids and condensate resulted in cash flow from operations of $177 million before working capital compared to $120 million in capital spending. Significant improvements in free cash flow compared to past periods were driven by a 100% improvement in pre-hedge realized prices per unit of production versus the prior year period, with realized price per unit reaching $3.25 in the second quarter. This realized price per unit is $0.41 above NYMEX Henry Hub, driven by a 118% increase in NGL price per barrel, which reached $27.92 pre-hedge. Realized NGL price on an Mcfe basis equates to $4.65 and condensate realizations equate to $9.60 per Mcfe, hence, the realized premium to Henry Hub. Additionally, Range's NGL prices exceeded a Mont Belvieu equivalent NGL barrel by $2.24 due to our unique portfolio of domestic and international sales contracts. Such that at quarter end and assuming the election of outstanding swaptions, Range was approximately 40% hedged on natural gas at a floor of $2.80 and with a ceiling of $3.04. As an example, Range's average swap for condensate production improves by $10 per barrel in the third quarter, while propane, butane and natural gasoline averages all improved by approximately $0.20 per gallon versus second quarter. Lease operating expenses remain near historic lows at $0.10 per unit on the back of consistent efficient Marcellus operations. Cash G&A expenses increased slightly to $31 million or $0.16 per unit. First, roughly $1.5 million related to legal expenses that should tail off next quarter. Cash interest expense was roughly $55 million, flat with the preceding quarter and with reduced debt balances should begin to decline in coming quarters. As discussed previously, an increase in revenue of $1 per NGL barrel equates to approximately $0.01 per Mcfe in cost. For reference, since February, Range's forecasted NGL realizations in 2021 have increased by approximately $7 per barrel, potentially resulting in an increase of approximately $250 million in pre-hedge revenue. Net of price-linked processing costs, forecasted '21 pre hedge cash flow from NGLs has increased by approximately $200 million since February, demonstrating the significant margin expansion from rising NGL prices. In aggregate, revenue improvements stemming from diverse marketing arrangements, coupled with prudent hedging and thoughtful expense management resulted in cash margin per unit of production expanding to $0.93. As described last quarter, near-term maturities have been a focus such that we reduced bond maturities through 2024 by almost $1.2 billion, while at the same time, improving liquidity to nearly $2 billion. During the second quarter, we reduced total debt by $66 million, including all subordinated bonds. At current commodity prices, forecast indicates leverage in the mid-1 times area is achievable in the first half of 2022.

Looking forward, consistent with our activity forecast for the second half of the year, the remainder of our capital spending is expected to taper through year-end, in line with our activity forecast previously communicated and placing us at or below our all-in budget of $425 million. Cash G&A expenses increased slightly to $31 million or $0.16 per unit.

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We reported earnings per share of $2.46 and an operating return on equity of 13.8% for the quarter. We achieved 2.1% growth in the third quarter, which represents a significant and expected recovery from the 2.3% premium decline we reported in the second quarter normalized for one-time premium returns. As announced last night, we entered into a $100 million accelerated share repurchase agreement, reflecting the strong excess capital we have generated so far this year from earnings. We delivered net written premium growth of 2.3% in the third quarter compared to a decline of 5.5% in the second quarter or flat excluding premium return. Overall, Personal Lines rate increases of 4.7% in the quarter were fairly consistent with prior trends and we are satisfied with the underlying retention when adjusted for the temporary increase in cancellations and non-renewals, following the temporary second quarter increases. Our Personal Lines year-to-date retention of 82% is a more indicative measure of our persistency, and should move back to the mid-80s over time. Additionally, we are encouraged by the continued success of our Prestige offering, which is adding 600 new accounts each month. Book consolidation activity also is continuing at an accelerated pace, with $71 million signed through the first nine months of the year, exceeding our expectations for the full year. Earlier this week, we announced the expansion of our Personal Lines business in Maryland, further diversifying our book of business and expanding our Personal Lines presence to 20 states. Entrepreneurs throughout the country are starting home-based businesses in record numbers, yet, nearly 60% of these businesses lack adequate insurance. As a top insurer and an industry thought leader in Michigan with 12% of our overall premiums in Michigan personal auto, we advocated for auto reform for more than a decade and it was essential that we excel in our implementation. Our third quarter Michigan auto premium grew approximately 4%, while average net premium per customer for us remain relatively consistent. We delivered net written premium growth of 1.9%, up from a decline of 4.6% in the second quarter. Our management liability, healthcare, E&S and specialty property businesses have posted growth in the double-digits in the quarter, while Specialty overall growth was 5%. Rate continues to accelerate in our core Commercial Lines book, now standing at 5.7% while Specialty rates are meaningfully higher led by management and professional liability, healthcare and specialty property. To that end, this quarter, for example, we conducted over 50 virtual CIAB executive meetings with many of the top 100 agents around the country, during which we discussed how we can enhance our capabilities to help all of us grow and better serve our customers. To-date, members of our senior management team have connected with over 500 of our agents, these engagements have been extremely fruitful. For the third quarter, we reported net income of $118.9 million, or $3.13 per fully diluted share compared with net income of $118.9 million or $2.96 per fully diluted share for the same period last year. After-tax operating income was $93.5 million or $2.46 per diluted share compared with $93.0 million or $2.31 per diluted share in the prior-year quarter. We recorded an all-in combined ratio of 94.2% compared with 94.4% a year earlier. Our ex-cat combined ratio was 88.4%, an excellent result compared to the 91.3% in the prior-year quarter. Catastrophe losses at $65.9 million, or 5.8% of net earned premiums came in slightly above our expectation for the quarter, but we were much more benign than the industry experience. In addition, in the quarter, we benefited from favorable prior year cat development of $9.6 million, which stems from a variety of events from recent accident years as well as to a much lesser extent, a small remaining favorable settlement from the 2018 wildfires. Turning to our ex-cat prior-year development, we reported net favorable development of $2.6 million with strong favorability in workers' compensation in other Commercial Lines, partially offset by additions in home, commercial auto and CMP. Over the past couple of years, we have consistently achieved rate increases around 10% and executed on a variety of underwriting actions to better position our portfolio. Coincidently, this quarter, we incurred about $6.5 million of favorable development from a few large CMP property claims that stemmed from prior-year catastrophe events. I'm pleased to report that our loss activity related to the $19 million in COVID reserves we held at the end of the second quarter remains limited. Our expenses ticked up 10 basis points in the quarter due to the timing of certain agent and employee incentive costs. Year-to-date, our expense ratio is consistent with our original budget of 31.5% and we have a clear line of sight to the expected 10 basis point expense ratio improvement for full-year 2020. We expect to continue delivering a 20 basis point improvement in the expense ratio going forward. Additionally, we recorded a non-ratio bad debt expense of approximately $3.6 million, which continues to gradually decline from the highs, we recorded in the first and second quarters. Consolidated net premiums written grew 2.1% in the third quarter, as we continue to see increasing momentum from the low point from the second quarter. In Personal Lines, we delivered a combined ratio, excluding catastrophes of 83.5%, representing an improvement of 6.9 points from the prior-year quarter. Homeowners current accident year loss ratio, excluding cats was 48.2%, essentially flat from the prior-year period. Turning to Commercial Lines, we reported a combined ratio, excluding catastrophes of 91.8%, relatively consistent with the prior-year quarter. CMP, current accident year loss ratio, ex-cat was 59.1%, up 2.7 points from the prior-year quarter, driven by several large property losses. Commercial auto ex-cat loss ratio improved 3.2 points to 64.4%, reflecting temporary lower frequency in physical damage claims, although, not to the extent we reported in personal auto. Workers' comp loss ratio was flat at 61.2% with some diminishing, but still favorable frequency of losses in the quarter. Other commercial lines improved 1.4 percentage points to 54.1% due to slightly lower losses in short-tail property lines. Net investment income of $67.6 million was down slightly from the same period of last year as we continued to experience pressure from lower new money yields. Our partnerships portfolio performed well, contributing $6 million to NII in the quarter. Cash and invested assets were $9 billion at the end of the third quarter, with fixed income securities and cash representing 86% of the total. Our fixed maturity investment portfolio has a duration of 4.7 years and is 96% investment grade. We delivered a strong operating return on equity of 13.8% in the quarter and 12.1% on a year-to-date basis, despite elevated cash, particularly in the second quarter. Our book value per share of $84.32 increased 4% during the quarter, driven by operating income and both realized and unrealized gains in our investment portfolio, partially offset by the payment of our regular quarterly dividend. With this in mind and considering current market levels, we have entered into a $100 million accelerated share repurchase agreement. We expect to receive 80% of the total shares on October 29th and anticipate receiving the final delivery of the remaining shares no later than early February 2021. After the final delivery of all shares under the ASR agreement, we will have repurchased approximately 2.2 million shares or 6% of the outstanding shares from the beginning of 2020. We will have approximately $122 million remaining under the existing share repurchase authorization. In August, we issued a 10-year $300 million senior unsecured note at a very attractive annual coupon of 2.5%. We used a portion of the proceeds to retire $175 million of subordinate debentures with a 6.35% coupon, improving our capital cost and overall capital structure. We are increasing our full-year 2020 net investment income target to $260 million to reflect performance in the third quarter. Our fourth quarter ex-cat combined ratio expectation has improved to around 91%. As I mentioned earlier, we are maintaining our expectation of a 10 basis point expense ratio improvement in 2020 from full-year 2019 and then returning to 20 basis points improvement in 2021 forward. We have a fourth quarter cat load of 3.8% of net premiums earned and assume an effective tax rate to roughly equal the statutory rate of 21%.

We reported earnings per share of $2.46 and an operating return on equity of 13.8% for the quarter. As announced last night, we entered into a $100 million accelerated share repurchase agreement, reflecting the strong excess capital we have generated so far this year from earnings. To that end, this quarter, for example, we conducted over 50 virtual CIAB executive meetings with many of the top 100 agents around the country, during which we discussed how we can enhance our capabilities to help all of us grow and better serve our customers. For the third quarter, we reported net income of $118.9 million, or $3.13 per fully diluted share compared with net income of $118.9 million or $2.96 per fully diluted share for the same period last year. After-tax operating income was $93.5 million or $2.46 per diluted share compared with $93.0 million or $2.31 per diluted share in the prior-year quarter. We recorded an all-in combined ratio of 94.2% compared with 94.4% a year earlier. With this in mind and considering current market levels, we have entered into a $100 million accelerated share repurchase agreement.

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We met and even exceeded what we said we would deliver 90 days ago. For Q3, our revenue growth was 5%, led by double-digit growth in NIKE Direct. 50 years ago, our journey began with a dream to serve athletes, and today, we're humbled by what we've achieved and we're thrilled and excited by what's to come. Rafael Nadal made history by becoming the first male tennis player to win 21 majors with his victory at the Australian Open, and he now stands alone at the top of the men's game. In Greater China, it featured snowboarder Cai Xuetong, and it saw an incredible response in that geo with over 6.1 billion impressions. Coach K has been a member of the NIKE family for nearly 30 years, and his leadership and clear set of values have meant so much to this company and to me personally. In January, Sotheby's auctioned off 200 pairs of the Louis Vuitton Air Force 1 by Virgil Abloh and reported that it set the record for the most valuable sneaker and fashion auction ever at more than $25 million, with all proceeds going to Virgil Abloh's Post-Modern Scholarship Fund. We expect FlyEase to be roughly $0.25 billion business by fiscal next year, with vast opportunity for even greater growth and value to come. Also in running, the Pegasus 38 saw very strong sell-through in the quarter, continuing the Peg's lineage as one of our powerhouse franchises. In Q3, digital revenue was up 22% on a currency-neutral basis as we continue to drive greater competitive separation, particularly through our app ecosystem. The NIKE mobile app was up more than 50% in the quarter and overtook Nike.com on mobile for our highest share of digital demand. Since its launch, a total of 6.7 million players from 224 countries have visited NIKELAND on Roblox. And we plan to continue driving energy there with virtual products like LeBron 19 styles special to Roblox. With NIKE Virtual Studios, our vision is to take our best-in-class experiences in digital and build Web 3 products and experiences to scale this community so that NIKE and our members can create, share and benefit together. Marketplace demand continues to significantly exceed available inventory supply, with a healthy pull market across our geographies. Across the marketplace, holiday retail sales finished strong, and spring retail sales are off to a great start, fueled by strong demand for performance men's running, Air Jordan 1, classics footwear and our apparel fleece franchises. 1 cool and No. 1 favorite brand in all 12 of our key cities around the world. Over the past four years, we have reduced the number of wholesale accounts worldwide by more than 50% while delivering strong revenue growth through NIKE Direct and our remaining wholesale partners. In Q3, NIKE Digital gained 3 points from the prior year and now represents 26% of our total NIKE Brand revenue. NIKE, Inc. revenue grew 5% and 8% on a currency-neutral basis, led by 17% growth in NIKE Direct. Wholesale returned to growth, up 1% on a currency-neutral basis. NIKE Digital grew 22%, fueled by strong demand through our NIKE app. NIKE-owned stores grew 14% with significant improvements in traffic during the quarter. Gross margin increased 100 basis points versus the prior year, driven primarily by higher NIKE Direct margins due to lower markdowns, favorable foreign currency exchange rates and a higher full price mix, partially offset by increased freight and logistics costs. SG&A grew 13% versus the prior year, primarily due to strategic technology investments, normalization of investment against brand campaigns, wage-related expenses and digital marketing investment to fuel heightened digital demand. Our effective tax rate for the quarter was 16.4% compared to 11.4% for the same period last year. Third quarter diluted earnings per share was $0.87. In North America, Q3 revenue grew 9% and EBIT was flat. NIKE Direct grew 27% versus the prior year, led by NIKE Digital delivering industry-leading growth, increasing 33% versus the prior year, driven by double-digit growth in traffic, strong growth in new members and member engagement and improvements in member buying frequency. NIKE-owned inventory levels increased 22% versus the prior year, with in-transit inventory now representing 65% of total inventory at the end of the quarter, as transit times are now more than six weeks longer than pre-pandemic levels and two weeks longer than the same period in the prior year. In EMEA, Q3 revenue grew 13% on a currency-neutral basis, with growth across all consumer segments, and EBIT grew 34% on a reported basis. NIKE Direct grew 22% on a currency-neutral basis, led by growth in NIKE-owned stores of 44% as we compare to uneven store closures due to COVID-related government restrictions in the prior year. NIKE Digital rose 11%, fueled by member-only access and app-exclusive releases and another quarter of strong double-digit growth in full price demand. Wholesale revenue grew 10%, led by even stronger growth rates from our strategic accounts. As a note, our business in both countries represent less than 1% of total company revenue. In Greater China, Q3 revenue declined 8% on a currency-neutral basis, and EBIT declined 19% on a reported basis. 1 cool and No. 1 favorite brand in China, creating separation and distinction versus the competition. Greater China delivered over $2 billion in revenue this quarter, driven by the Lunar New Year period as Nike.com saw record weekly traffic. NIKE Direct was down 11% on a currency-neutral basis, with declines in both digital and physical retail channels. NIKE-owned stores were down 5% and Digital declined 19% due to the ongoing supply delays that negatively impacted timing of product launches. Q3 revenue grew 19% on a currency-neutral basis and EBIT grew 17% on a reported basis. NIKE Direct grew 39%, led by NIKE Digital growth of 61% due to record-setting member days across a number of territories, delivering more than two and a half times the demand versus a typical week. NIKE-owned stores grew 17% while the wholesale channel grew 9%. Our focus on localized product and content, particularly the launch of our Kwondo 1 collaboration with K-Pop star G-Dragon demonstrated yet again our deep connection to consumers. It was APLA's biggest hyperlocal launch ever, reaching 91 million users on social and 3.8 million entries across SNKRS and our marketplace partners. We now expect gross margin to expand by at least 150 basis points versus the prior year as strong consumer demand continues to fuel high levels of full price realization, low markdown rates and low customer returns. Despite the recent strengthening of the U.S. dollar, we continue to expect foreign exchange to be a 55 basis point tailwind versus the prior year.

For Q3, our revenue growth was 5%, led by double-digit growth in NIKE Direct. Marketplace demand continues to significantly exceed available inventory supply, with a healthy pull market across our geographies. Third quarter diluted earnings per share was $0.87.

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Our consolidated earnings for the first quarter of 2021 were $0.98 per diluted share compared to $0.72 for the first quarter of 2020. A few weeks ago, we announced our aspirational goal to reduce our carbon emissions for natural gas by setting new natural gas goal of being carbon-neutral by 2045, with a near-term goal of reducing greenhouse gas emissions by 30% by 2030. We're also moving the dial toward achieving our clean electricity goal of providing customers with carbon-neutral electricity by the end of 2027, and carbon-free electricity by 2045. We are confirming our 2021 through 2023 earnings guidance. But on the happy note, we had a great first quarter, the Avista Utilities contributed $0.92 per diluted share compared to $0.68 last year. The ERM in Washington with a pre-tax benefit of $4.3 million in the first quarter compared to $5.2 million in the first quarter of 2020. We continue to be committed to investing the necessary capital in our utility infrastructure, and we expect Avista Utilities' capital expenditures to total about $415 million in 2021. On April 30, we had $182 million of available liquidity under our $400 million line of credit, and we expect to extend that line of credit into a multi-year deal in the second quarter. We expect to issue approximately $120 million of long-term debt in 2021, and $75 million of equity. As Dennis mentioned earlier, we are confirming our 2021, 2022, and 2023 earnings guidance with consolidated ranges of $1.96 to $2.16 per diluted share in '21, $2.18 to $2.38 in 2022, and $2.42 to $2.62 in 2023. Our '21 earnings guidance reflects again unrecovered structural cost estimated to reduce our return on equity by approximately 70 basis points. And in addition, our '21 guidance reflects a regulatory timing lag estimated to reduce our equity return by approximately 100 basis points. This results in a return on equity for Avista Utilities of approximately 7.7% in 2021. We are currently forecasting customer growth of about 1% annually for Avista Utilities. For 2021, Avista Utilities is expected to contribute in the range of $1.93 to $2.07 per diluted share with the midpoint of our guidance range, not including any expense or benefit under the Energy Recovery Mechanism. Our current expectation is to be in the 75% customer, 25% Company sharing band, which is expected to add approximately $0.06 per diluted share. For 2021, we expect AEL&P to contribute in the range of $0.08 to $0.11 per diluted share, and our outlook for both Avista Utilities and AEL&P assumes among other variables normal precipitation and slightly below normal about 92% for Avista Utilities hydroelectric generation for the year. For 2021, we expect our other businesses to be between a loss of $0.05 to $0.02 per diluted share.

Our consolidated earnings for the first quarter of 2021 were $0.98 per diluted share compared to $0.72 for the first quarter of 2020. We are confirming our 2021 through 2023 earnings guidance.

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We appreciate the resiliency of the Skechers organization over the past 18 months and hope that those facing the ongoing COVID-related challenges are staying safe. Skechers second quarter financial results exceeded expectations as we achieved record quarterly sales of $1.66 billion, a 127% increase over 2020 and a 32% increase over 2019. This marks the first time our quarterly sales have exceeded $1.6 billion and together with our first quarter yields a new six-month record of over $3 billion. We also achieved a record gross margin of 51.2%, record quarterly diluted earnings per share of $0.88, an exceptionally strong operating margins of 12.1%. Our record revenues were the result of increases of 147% in our domestic business and 114% in our international business and both businesses increased over 30% compared to 2019. International sales comprised 56% of our total sales in the quarter. Our international wholesale business grew 95% from the second quarter last year and 37% from 2019. The quarterly sales growth was primarily driven by China with an increase of 51% over the same period in 2020 and a 68% increase from 2019, as well as Europe, which had an increase of 150% over 2020 and 85% over 2019. Our joint venture businesses increased 56% for the quarter compared to 2020 and 46% as compared to 2019. Subsidiary sales increased 163% from 2020 and 48% from 2019 despite temporary closures and reduced operating hours in many regions, including India, Canada, Japan and parts of Europe and South America. Our distributor business improved 122% over last year, though it was down 7% from 2019. Skechers direct-to-consumer business increased 138% over 2020 and 26% over 2019 despite temporary store closures, primarily in India, Canada, Japan and Chile and reduced hours in many of our international company-owned stores due to local health guidelines. Worldwide comp store sales were up 109% compared to 2020, including 96% domestically and 165% internationally. As compared to 2019, worldwide comp store sales increased 13%, including an increase of 22% domestically and a 9% decrease internationally, reflecting the ongoing store closures. Our direct-to-consumer average selling price per unit rose 17% compared to 2020, indicative of our less promotional stance and the success of our comfort technology products. Our domestic direct-to-consumer sales increased 101% compared to the second quarter of 2020 and nearly 30% compared to 2019. Driving this growth was a 232% increase in our retail store sales or 11% over 2019. The domestic retail store improvement was partially offset by a decrease in our domestic e-commerce channel of 25%, which faced difficult comparisons to the prior year. However, it is important to note that domestic e-commerce sales were up 337% over 2019. Our international direct-to-consumer business increased 259% over the second quarter of 2020 and 20% over 2019. In the second quarter, we opened 13 company-owned Skechers stores, including key locations in Antwerp, Barcelona Berlin and Lima. We have opened three stores to-date in the third quarter and have another three planned through the end of the month, with another 20 to 25 expected to open by year's end. An additional net 63 third-party Skechers stores opened in the second quarter across 26 countries, including our first in the Dominican Republic. In total, at quarter end, there were 4,057 Skechers stores around the world. Another 145 to 155 third-party stores are expected to open by year-end. 206% in the second quarter compared to the same period in 2020 and 31% compared to the same period in 2019. We have completed our new 1.5 million square foot China distribution center, which as of this month is fully operational. We are continuing to work on the expansion of our LEED Gold-certified North American distribution center, which will bring our facility in Southern California to 2.6 million square feet in 2022. Sales in the quarter achieved a new record totaling $1.66 billion, an increase of $928.3 million or 127% from the prior year and a 32% increase over the second quarter of 2019 with both our domestic and international businesses growing over 30%. On a constant currency basis, sales increased $857 million or 118% from the prior year. International wholesale sales increased 95% year-over-year and grew 37% compared to the second quarter of 2019. Our joint ventures grew 56% year-over-year, led by China which grew 51% on the strength of robust e-commerce demand, partially offset by weakness in several adjacent markets, which are still being impacted by the pandemic. As compared to the second quarter of 2019, China grew by 68%. Subsidiary sales increased an impressive 163% year-over-year and as compared to the second quarter of 2019 grew 48%. Our distributor business grew 122% year-over-year, declined by 7% as compared with the second quarter of 2019. Direct-to-consumer sales increased 138% year-over-year, supported by growth in both domestic and in international markets, albeit at a lower rate due to store closures in the period. As compared with the second quarter of 2019, direct-to-consumer sales increased 26%, the result of a 30% increase domestically and a nearly 20% increase internationally. Domestic wholesale sales grew 206% year-over-year and as compared to the second quarter of 2019 increased 31%. Gross profit was $849.5 million, up 130% or $480.9 million compared to the prior year. Gross margin for the quarter was 51.2%, an increase of over 70 basis points versus the prior year and 270 basis points as compared to 2019. Total operating expenses increased by $220.3 million or 51% to $652.44 million in the quarter versus the prior year period. Selling expenses in the quarter increased year-over-year by $72.2 million or 120% to $132.4 million. However, as a percentage of sales, this represented a year-over-year decrease of 30 basis points and as compared to 2019, a 100 basis point reduction. General and administrative expenses in the quarter increased year-over-year by $148 million or 40% to $519.9 million but decreased as a percentage of sales by almost 20 percentage points. Earnings from operations were $201.2 million versus a prior year loss of $61 million, an increase of $262.2 million. Compared to the second quarter of 2019, earnings from operations increased 81%, operating margin was 12.1% as compared with 8.8% in the second quarter of 2019, an increase of 330 basis points. Net earnings were $137.4 million or $0.88 per diluted share on 156.7 million diluted shares outstanding. This compares to prior-year net loss of $68.1 million or $0.44 per diluted share on 154.1 million diluted shares outstanding. As compared to the second quarter of 2019, net earnings improved 83% from $75.2 million or $0.49 per diluted share. Our effective income tax rate for the quarter was 20.4% versus an income tax benefit of $4.3 million in the prior year and an 18.4% effective tax rate in the second quarter of 2019. During the second quarter, we fully repaid our revolving credit facility, of which $452.5 million was outstanding and still ended the quarter with $13.2 billion in cash, cash equivalents and investments. This reflects a decrease of 234.5 million or 15.1% from June 30, 2020. Trade accounts receivable at quarter-end were $778.2 million, an increase of $300.2 million from June 30, 2020, predominantly a result of higher wholesale sales. Total inventory was $1.06 billion, an increase of 2.9% or $29.5 million from June 30, 2020. Total debt, including both current and long-term portions, was $312 million at June 30, 2021 compared to $763.3 million at June 30, 2020, reflecting the repayment of our revolving credit facility during the quarter. Capital expenditures for the second quarter were $62 million, of which $23.1 million related to the expansion of our joint venture on domestic distribution center in the United States, $14.7 million related to investments in our direct-to-consumer technologies and retail stores, $8 million related to our new now fully operational distribution center in China and $7.8 million related to investments in our new corporate offices in Southern California. For the remainder of 2021, we expect total capital expenditures to be between $150 million and $200 million. We expect third quarter 2021 sales to be in the range of $1.6 billion and $1.65 billion and net earnings per diluted share to be in the range of $0.70 and $0.75. For fiscal 2021, we now expect sales to be in the range of $6.15 billion and $6.25 billion. And net earnings per diluted share to be in the range of $2.55 and $2.65. And then, our effective tax rate for the year will be approximately 20% as compared to a rate of 5.5% in 2020 and 70% in 2019. Our second quarter performance exceeded expectations with three new records, quarterly revenues of more than $1.6 billion, gross margins of 51.2% and diluted earnings per share of $0.08.

Skechers second quarter financial results exceeded expectations as we achieved record quarterly sales of $1.66 billion, a 127% increase over 2020 and a 32% increase over 2019. We also achieved a record gross margin of 51.2%, record quarterly diluted earnings per share of $0.88, an exceptionally strong operating margins of 12.1%. Net earnings were $137.4 million or $0.88 per diluted share on 156.7 million diluted shares outstanding. We expect third quarter 2021 sales to be in the range of $1.6 billion and $1.65 billion and net earnings per diluted share to be in the range of $0.70 and $0.75. For fiscal 2021, we now expect sales to be in the range of $6.15 billion and $6.25 billion. And net earnings per diluted share to be in the range of $2.55 and $2.65.

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Total sales for the quarter were $1.8 billion. Adjusted operating margin was 15.1%, driven by lean initiatives, cost actions and favorable mix from mining and mods. Cash conversion was strong with cash flow from operations of $292 million, cash generation was due in large part to good working capital management, allowing us to deliver on our financial priorities, including the strategic acquisition of Nordco, which I'll touch up on more in a moment. Total multiyear backlog was $21.7 billion, up sequentially over the prior quarter, providing us better visibility into 2021 and beyond. Overall, we ended the quarter with adjusted earnings per share of $0.89, a strong reinforcement that our teams are continuing to take the necessary steps to control what we can, deliver long-term growth of the company and increased shareholder value. In the area of synergies, we're on track to deliver the full run rate of $250 million in synergies this year, and we have positioned the company for long-term profitable growth. This includes reducing total operational square footage by 5% since January of last year, and we will further reduce our square footage by an additional 2% for the remainder of 2021. You saw that with our recent acquisition of Nordco, which is a leader in the maintenance of waste space, with 60% of its revenues coming from aftermarket services and a significant installed base of over 5,000 units. As we have shared before, there are more than 10,000 FDL locomotives running globally. With this next-gen technology, we're opening up a multimillion-dollar pipeline of opportunity that is helping customers drive down fuel consumption by up to 5% as well as drive down emissions. That means for a single locomotive burning 250,000 gallons of fuel, it can translate into a $25,000 in savings per year. Also, when it comes to technology differentiation, and sustainable transportation, we completed a significant operational milestone with our flex drive battery electric locomotive, testing it in revenue services with BNSF across more than 13,000 miles of track. Through this demonstration, the flex drive was able to reduce both fuel consumption and emissions by more than 11%, a game changer in decarbonizing rail. Finally, we had a solid quarter in transit, winning new brakes, doors, and HVAC contracts in India, Taiwan and France, including a significant order for platform doors and gates at over 30 train stations in Marcel. Sales for the first quarter were $1.8 billion, which reflects a 5% decrease versus the prior year, driven by lower North America OE freight markets as a result of the disruption caused by the pandemic. For the quarter, operating income was $192 million, and adjusted operating income was $277 million, which was down 9% year-over-year. Adjusted operating income excluded pre-tax expenses of $85 million of which $70 million was for noncash amortization and $16 million of restructuring and transaction costs related to the acquisition of Nordco, along with restructuring due to the 2021 locomotive volumes and restructuring in our U.K. operations. Adjusted operating margin was 60 basis points lower than the first quarter last year, but up 110 basis points from the fourth quarter versus last year, adjusted operating margin was impacted by under absorption costs at our manufacturing facilities, stemming from fewer locomotive deliveries as well as sales mix impacted from lower digital electronics and a higher level of transit sales. At March 31, our multiyear backlog was $21.7 billion, up quarter-over-quarter, our rolling 12-month backlog, which is a subset of the multi-year was $5.7 billion and continues to provide good visibility into the year. Looking at some of the detailed line items for the first quarter, adjusted SG&A declined 2% year-over-year to $224 million. This was the result of cost actions during the downturn and excludes $11 million of restructuring and transaction expenses. For the full year, we expect SG&A to be up about 5% versus 2020, driven by the normalization of costs following the COVID disruption. Overall, our investment in technology is still expected to be about 6% to 7% of sales. Amortization expense were $70 million. For 2021, we expect noncash amortization expense to be about $285 million and depreciation expense of about $195 million. Our adjusted effective tax rate was 27.5%, which was higher than year-over-year due to certain discrete items during the quarter. We expect a full year 2021 effective tax rate to be about 26%. And the first quarter GAAP earnings per diluted share were $0.59 and adjusted earnings per diluted share were $0.89. Across the freight segment, total sales decreased 9% from last year to $1.2 billion, primarily driven by North America OEM markets but partially offset by strong services and aftermarket growth. In terms of our product lines, equipment sales were down 36% year-over-year, mainly due to zero deliveries in North America, which resulted in roughly 50% fewer locomotive deliveries versus last year, a dynamic that unfortunately persists. In line with improving freight traffic, our services sales improved a solid 13% versus last year and was up 3% sequentially. Digital electronics sales were down 10% year-over-year as orders shifted to the right in North America due to the COVID disruption. Component sales were down 8% year-over-year. This is compared to a 45% lower railcar build year-over-year, demonstrating the diversification within our Components business. Freight segment adjusted operating income was $214 million for an adjusted margin of 18.1% versus last year, the benefit of synergies and cost actions were offset by sales mix as well as under absorption due to lower locomotive deliveries. Finally, Freight segment backlog was $18 billion, up from the prior quarter on broad multiyear order momentum across the segment. Across our Transit segment, sales increased 3% year-over-year to $647 million, driven largely by steady aftermarket sales and favorable foreign exchange rates, offset somewhat by the disruption from the COVID-19 pandemic. Aftermarket sales were up about 5% from last year. Adjusted segment operating income was $79 million, which was up 6% year-over-year for an adjusted operating margin of 12.2%. We are pleased with the momentum under way, and the teams are committed to execute on more actions to drive 100 basis points of margin improvement for this segment in 2021. Finally, Transit segment backlog was $3.7 billion. Despite a seasonally challenging quarter, we generated $292 million of operating cash flow, demonstrating the resiliency and quality of our business portfolio. Cash flow was driven largely by good conversion of net income and focused working capital management, including a $93 million incremental benefit from accounts receivable securitization, which provides attractive financing and provides liquidity. During the quarter, total capex was $27 million. 2021, we expect capex to be about $180 million or about 2% of our expected sales. Our adjusted net leverage ratio at the end of the first quarter was 2.7 times, and our liquidity is robust at $1.7 billion. When it comes to North America railcar built, railcars are coming back into use, more than 20% of the North American railcar fleet remains in storage, but it's back to pre-COVID levels. And forecast, estimate the railcar build this year to be below 30,000 cars. We are updating our sales guidance to $7.7 billion to $7.9 billion and updating adjusted earnings per share guidance to a range of $4.05 to $4.3.

Total sales for the quarter were $1.8 billion. Total multiyear backlog was $21.7 billion, up sequentially over the prior quarter, providing us better visibility into 2021 and beyond. Overall, we ended the quarter with adjusted earnings per share of $0.89, a strong reinforcement that our teams are continuing to take the necessary steps to control what we can, deliver long-term growth of the company and increased shareholder value. In the area of synergies, we're on track to deliver the full run rate of $250 million in synergies this year, and we have positioned the company for long-term profitable growth. Sales for the first quarter were $1.8 billion, which reflects a 5% decrease versus the prior year, driven by lower North America OE freight markets as a result of the disruption caused by the pandemic. At March 31, our multiyear backlog was $21.7 billion, up quarter-over-quarter, our rolling 12-month backlog, which is a subset of the multi-year was $5.7 billion and continues to provide good visibility into the year. And the first quarter GAAP earnings per diluted share were $0.59 and adjusted earnings per diluted share were $0.89. We are updating our sales guidance to $7.7 billion to $7.9 billion and updating adjusted earnings per share guidance to a range of $4.05 to $4.3.

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At this time, it is uncertain how long our business will be negatively affected by COVID-19 and the associated economic and market downturn. Second quarter adjusted net revenues of $513.9 million, decreased 4% versus the second quarter of 2019. For the first six months of 2020, adjusted net revenues of $948.9 million, decreased 1% versus the prior year. Although our revenues from Investment Banking, that is advisory fees, underwriting fees and commissions, increased by 2% versus the prior period. Second quarter advisory fees of $336.5 million declined 24%, compared to the second quarter of 2019, which was an unusually strong quarter. Advisory fees for the six months of 2020 were $695.6 million, a decline of 10%, compared to the prior year period. We expect our market advisory share -- our market share in advisory fees, among all publicly reported firms, on a trailing 12-month basis to be 8.2%, compared to 8.3% at year-end 2019. Second quarter underwriting fees of $93.6 million, increased more than 450%, compared to the second quarter of 2019. For the first six months of the year, underwriting fees were $114.7 million, an increase of more than 160% versus the prior year period. Commissions and related fees of $54.1 million, increased 11% versus the second quarter of 2019. For the first six months of 2020, commissions and related fees of $109.5 million, increased 21% versus the prior year period. Asset management and administration fees from our consolidated businesses were $15.2 million, an increase of 4%, compared to the second quarter of 2019. For the first six months of 2020, asset management and administration fees from our consolidated businesses were $30.5 million, an increase of 5% from the prior year period. Turning to expenses, our compensation ratio for the second quarter is 65%, and our compensation ratio for the first six months of 2020 is 63.6%. A word of explanation about the compensation ratio, the 63.6% accrual in the first half reflects, as it has in past years, an estimate for the full-year compensation ratio, which includes an estimate for 2020 incentive compensation. The short-term interest being higher earnings this year and the longer-term interest being keeping the team together that has produced more than $2 billion of revenue in 2018 and 2019 and investing in new talent for our future growth. Non-compensation costs of $77.1 million in the second quarter declined 11% from the second quarter of 2019. For the first six months, non-compensation costs of $159.9 million, declined 4%. Adjusted operating income and adjusted net income of $102.7 million and $71.8 million, declined 26% and 29%, respectively, and adjusted earnings per share of $1.53, declined 26%, all versus the second quarter of 2019. For the first six months of 2020, adjusted operating income, and adjusted net income of $185.3 million and $129.6 million, declined 21% and 29%, respectively, and adjusted earnings per share of $2.74, declined 27% versus the prior six-month period. Year-to-date, we returned $206 million to shareholders through dividends and repurchase of 1.9 million shares at an average price of $76.22. Our Board declared a dividend of $0.58, consistent with prior quarters, and reflective of our results for the quarter. As the quarter began, merger activity was muted as clients managed through the dislocation of the sudden impact of the COVID-19 pandemic. Announced M&A volumes were down 41% in the first six months of 2020, and the number of announced transactions is down 15%. The second quarter was particularly weak, announced global M&A volumes were down more than 50%, compared to last year's second quarter and the number of announced transactions declined 29%. The equity markets are currently strong for many sectors. We sustained our number one ranking for volume of announced M&A transactions over the last 12 months, both globally and in the US among independent firms. Among all firms, we are once again number four in the US in announced volume over the last 12 months, and we ranked number three among all firms in the US based on number of transactions for the first six months of 2020. We were pleased to continue to advise on some of the most important M&A assignments of the first half, including three of the 10 largest global M&A transactions, and four of the five largest M&A transactions in the United States. We are pleased that we ranked number one among all firms in number of announced restructuring deals and number of completed restructuring deals in the US in the league tables for the first half of the year, and we've been involved in seven of the 10 largest bankruptcies by total actual liabilities year-to-date. Two recent examples include we were an advisor to Boeing on a $25 billion offering of senior notes, and an advisor to Ford on its $8 billion debt financing. We served as an active bookrunner or co-manager on six of the 10 largest IPOs in the first half of 2020. We completed our largest ever active bookrun transaction when we advised PNC on the secondary offering of its 22% stake in BlackRock. We advised Danaher on its upsized $3.1 billion offering which was split between common stock, and convertible preferred stock. For the second quarter of 2020, net revenues, net income and earnings per share on a GAAP basis were $507.1 million, $56.4 million, and $1.35, respectively. For the first half of 2020, net revenues, net income and earnings per share on a GAAP basis were $934 million, $87.6 million, and $2.08, respectively. For the first half, we expensed $1.1 million related to the Class J LP units. As we noted last quarter, we expect to incur separation and transition benefits and related costs of approximately $38 million, $8.2 million of which was recorded as special charges in the second quarter of 2020. Year-to-date, we have recorded $30.3 million as special charges related to the realignment initiative. Our adjusted results for the quarter and first six months also excluded special charges of $0.4 million and $1.9 million, respectively, related to accelerated depreciation expenses. Second quarter other revenue increased compared to the prior-year period, primarily as a result of gains of $15.5 million in the investment funds portfolio, which is used as an economic hedge against a portion of our deferred cash compensation program. Other revenues for the first six months of 2020 decreased versus the prior year, primarily reflecting a net loss of $6.8 million on this investment fund portfolio. Firmwide non-compensation costs per employee were approximately $43,000 for the second quarter, down 13% on a year-over-year basis. Our GAAP tax rate for the second quarter was 24.5%, compared to 24.8% in the prior-year period. On a GAAP basis, the share count was 41.9 million for the second quarter. Our share count for our adjusted earnings per share was 47 million shares, down versus the prior-year period, driven by share repurchases and a lower average share price. Finally, with regard to our financial position, we hold $1 billion of cash and cash equivalents, and approximately $100 million in investment securities as of the end of the quarter, as we had transitioned nearly all liquid assets to cash and cash equivalents in the first half. Our current assets exceed current liabilities by approximately $950 million.

At this time, it is uncertain how long our business will be negatively affected by COVID-19 and the associated economic and market downturn. For the first six months of 2020, asset management and administration fees from our consolidated businesses were $30.5 million, an increase of 5% from the prior year period. Adjusted operating income and adjusted net income of $102.7 million and $71.8 million, declined 26% and 29%, respectively, and adjusted earnings per share of $1.53, declined 26%, all versus the second quarter of 2019. Our Board declared a dividend of $0.58, consistent with prior quarters, and reflective of our results for the quarter. As the quarter began, merger activity was muted as clients managed through the dislocation of the sudden impact of the COVID-19 pandemic. The equity markets are currently strong for many sectors. For the second quarter of 2020, net revenues, net income and earnings per share on a GAAP basis were $507.1 million, $56.4 million, and $1.35, respectively. As we noted last quarter, we expect to incur separation and transition benefits and related costs of approximately $38 million, $8.2 million of which was recorded as special charges in the second quarter of 2020. Year-to-date, we have recorded $30.3 million as special charges related to the realignment initiative.

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Orders for the quarter were $390 million and frankly, much stronger than we had anticipated. We generated $21 million of free cash flow during the quarter and ended the quarter with $101 million of cash on hand. Our total liquidity of $397 million at the end of September positions us well for the cyclical nature of the Crane business and to execute on our strategic growth initiatives. Our third-quarter orders totaled $390 million, an increase of 10% compared to $353 million of orders last year. Favorable changes in foreign currency exchange rates positively impacted our year-over-year orders by approximately $6 million. The book-to-bill in the quarter was $1.1 million. Our third-quarter ending backlog of $465 million was essentially flat over the prior year and up $35 million or 8% on a sequential basis. On a currency-neutral basis, backlog decreased 4% year over year. Net sales in the third quarter of $356 million decreased $92 million or 21% from a year ago. Net sales were favorably impacted by approximately 2% from changes in foreign currency exchange rates. Gross profit decreased $23 million year over year, mainly driven by the lower volume in the Americas. Gross profit percentage decreased to 140 basis points to 18% from the same period in 2019, primarily due to the impact of lower production levels. Third-quarter engineering, selling, and administrative expenses of $50 million decreased by approximately $5 million year over year. As a result, third-quarter adjusted EBITDA amounted to $25 million or 7% of net sales. Our flow-through on the year-over-year sales decline was approximately 19%, reflecting excellent performance in managing our costs in this uncertain environment. Restructuring costs in the quarter totaled $4 million and were mainly due to headcount reductions in the Americas. Our GAAP diluted earnings per share in the quarter was a loss of $0.01 per share versus income of $0.51 per share in the prior year. On an adjusted basis, diluted earnings per share was income of $0.10 compared to $0.54 in the comparable period. In the third quarter, we generated $28 million of operating cash flows, which was primarily driven by a reduction in working capital of $19 million. On a currency-neutral basis, we reduced inventories by approximately $18 million during the quarter. We continue to closely manage our working capital needs to current demand levels and remain on track to achieve our planned $80 million inventory reduction on a currency-neutral basis. During the third quarter, total liquidity increased approximately 12% from a year ago. In the quarter, we repaid the $50 million draw on our ABL facility and ended the period with zero borrowings on our ABL facility. Our net debt leverage ratio is 2.6 times, providing us with sufficient runway to deploy capital for growth initiatives. Accordingly, our forecast for revenue is between $425 million and $450 million and between $18 million and $23 million for adjusted EBITDA.

Our GAAP diluted earnings per share in the quarter was a loss of $0.01 per share versus income of $0.51 per share in the prior year. On an adjusted basis, diluted earnings per share was income of $0.10 compared to $0.54 in the comparable period.

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Today, we announced net income of $0.3 million or $0.02 per share for the third quarter of 2020. The company estimates that the ongoing COVID-19 pandemic unfavorably impacted third quarter net income by approximately $0.01 per share. Through the first three quarters of 2020, net income is $18.6 million or $1.25 per share. For comparison purposes, recall that in the first quarter of 2019, the company recognized a onetime net gain of $9.8 million, or $0.66 per share, on the company's divestiture of its nonregulated business subsidiary, Usource. Adjusting for this onetime gain, net income is down about $4.4 million or $0.29 per share compared to 2019. The year-to-date decrease in earnings is primarily due to the warmer than normal winter weather in Q1, which unfavorably affected net income by approximately $3.1 million or $0.20 per share. In addition to the warmer winter weather, we estimate that net income has been unfavorably impacted by approximately $0.04 per share due to the COVID-19 pandemic. The positive test rates in each of our states rank in the lowest 10 of all 50 states. We estimate that the impact over the last 10 years from our customers choosing natural gas rather than home heating oil has had the impact of taking roughly 60,000 cars off the road. Nearly 2/3 of main households still rely on fuel oil as their primary energy source for home heating, a larger proportion than in any other state in the United States. In New Hampshire, more than 2/5 of households rely on fuel oil, the second highest proportion of the nation behind Maine. As a result, we decreased our fugitive emissions from natural gas distribution by 47 metric tons over the last two years, lowering our total generation of fugitive greenhouse gas emissions by 9% in 2019 when compared to 2017. In fact, our safety metrics place us in the top 1/3 of our industry peers and have continued to improve over time. We believe the framework we've established from employee relations has been successful as backed by a recent employee survey where 90% of our employees report being proud to work for Unitil. In fact, compared to the prior year, we have increased our capital investment by more than 20%. This energy storage system has the ability to serve over 1,300 homes for over two hours and is designed to reduce peak loading on the substation equipment. This project has a capacity representing over 2% of our system peak in Massachusetts and offers a solution to advanced grid operations control cost variability and aid in the overall system reliability as we support renewable energy solutions. Year-to-date 2020, our electric gross margin was $70 million, a decrease of $0.6 million compared to 2019. We estimate the COVID-19 pandemic unfavorably affected electric margin by approximately $0.7 million. Through the first nine months of 2020, total electric kilowatt hour sales increased 1.2% relative to 2019. Residential sales increased 8.2% primarily reflecting stay at home orders and continuing remote work, along with warmer summer weather relative to the prior year. C&I sales decreased 3.6%, reflecting lower usage due to the COVID-19 pandemic. For the first nine months of 2020, our gross gas margin was $83.3 million, a decrease of $2.2 million over 2019. The company estimates that year-to-date gas margin was lower by $3.2 million due to warmer weather. We also estimate that the COVID-19 pandemic unfavorably affected gas margin by $1.3 million due to lower commercial and industrial usage. Those unfavorable variances were partially offset by higher distribution rates and customer growth of $2.3 million. Through the first nine months of 2020 natural gas therm sales decreased 7.1% compared to 2019. The company estimates that weather-normalized gas therm sales, excluding decoupled sales, were down 1.9% year-over-year. I also note, we currently are serving 2.9% more gas customers than in the same time in 2019, illustrating our growing customer base. As I noted, 2020 year-to-date gross margin -- excuse me, gross sales margin is lower than 2019 by $2.8 million. Core operation and maintenance expenses decreased by $0.9 million compared to the same period in 2019. This decrease primarily is due to lower employee benefit costs of $1.2 million as well as lower maintenance expense of $0.3 million, partially offset by higher bad debt expense of $0.4 million and higher professional fees of $0.2 million. Depreciation and amortization was higher by $1.7 million, reflecting higher levels of utility plant and service. Taxes other than income taxes increased by $0.9 million, reflecting property taxes associated with higher levels of net plant and service and a nonrecurring tax abatement realized in 2019 of $0.6 million, that increase was partially offset by $0.6 million of payroll credits realized in the third quarter associated with the Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act. Interest expense decreased by $0.2 million, reflecting lower interest rates on short-term debt. Other expense increased by $0.4 million due to higher retirement benefit costs. Next, we've isolated the full Usource effect of $10.3 million, which was realized in 2019. This includes the after-tax gain on the divestiture of $9.8 million and $0.5 million, reflecting the net of revenues and expenses realized through Usource operations in 2019. Lastly, income taxes decreased $0.8 million, reflecting lower pre-tax earnings in the period. As Tom mentioned earlier, we estimate that the COVID-19 pandemic affected earnings per share by $0.01 in the quarter, bringing the year-to-date effect to $0.04 per share. The combined effect on gas and electric sales margin was $0.8 million in the third quarter of 2020 and $2 million year-to-date. Year-to-date O&M expenses have been favorable by $0.7 million. As noted earlier, the company was able to lower taxes other than income taxes by $0.6 million by recognizing payroll tax credits associated with the CARES Act. In the third quarter, we received proceeds of $95 million of long-term debt. The debt was placed at our regulated subsidiaries and carries an average interest rate of 3.72% with a 20-year tenor. As a result of the financing, we have liquidity of about $161 million, enabling the company to continue executing on our long-term plan. On Slide 15, we are pleased to announce that our gas transmission pipeline, Granite State Gas, recently filed an uncontested rate settlement with the FERC providing for an annual revenue increase of $1.3 million, with rates to become effective in the fourth quarter of this year. If those mechanisms are approved, the percentage of our decoupled sales to total sales would increase from approximately 25% to 75%, and over 80% of our meters would be under decoupled rate structures.

Today, we announced net income of $0.3 million or $0.02 per share for the third quarter of 2020.

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Deployment of our lean portfolio management toolset, which significantly accelerates the efficiency and impact of R&D investments, achieved a greater than 40% increase in our on-time program delivery. The application of FBS and digital analytics and search optimization generated 25% growth in digital traffic, from pre-pandemic levels across the portfolio. Meanwhile, the use of FBS growth tools has accelerated innovation at Fluke Health Solutions over the past 18 months and continues to drive excellent top line performance. As we highlighted at our Investor Day, we see substantial runway across our $40 billion served market for disciplined capital allocation to accelerate our strategy. Turning to a quick summary of the results in the quarter on slide four, we generated year-over-year total revenue growth of 26.7% as revenue strength exceeded the high end of our guidance. Adjusted operating margin was 22.2% while adjusted earnings per share was $0.66, representing a year-over-year increase of 53.5%. Given the outperformance for both top line and our adjusted operating margin we delivered $282 million of free cash flow, which represented 118% conversion of adjusted net income. iOS posted total revenue growth of 31.2% in the second quarter. This included mid-20% core growth in North America, low 30% core growth in Western Europe and low 20% core growth in China. Fluke's core revenue increased in the mid-30% range. The company's iNet offering remained resilient, increasing by mid single-digits with net retention solidly above 100%. Gordian increased by mid-teens, driven by low 20% growth in the procurement business and high teens growth in estimating. Precision Technologies segment posted a total revenue increase of 25.1% in the second quarter. This included low 20% growth in North America, mid-20% growth in Western Europe and mid-teens growth in China. Tektronix increased by approximately 30%, with another quarter of strong demand across its product businesses, including accelerating point-of-sale trends in each of its major regions. PacSci EMC grew in the low 20% range, with the business seeing some alleviation of the COVID-related shutdowns and approval delays that impacted shipments in previous quarters. Total revenue increased 21.8%, including 11% core growth. While elective procedure volumes increased on a year-over-year basis, Q2 volumes came in a bit lower than expected at approximately 93% of pre-COVID levels, which was consistent with the Q1 exit rate. ASP also continued to expand its global installed base of terminal sterilization capital equipment, which grew at a 3.5% annualized rate in Q2. Censis increased in the mid-20% range with mid-teens growth in its CensiTrac SaaS offering as well as strong growth in its professional services business. FHS saw high-teens growth from its Optimize and OneQA software solutions, which benefited from accelerated growth investments over the last 18 months. Adjusted gross margins were 57.3%, up 100 basis points on a year-over-year basis. This increase reflected 130 basis points of price realization as we delivered another quarter of solid performance managing price cost across the portfolio. Q2 adjusted operating profit margin was 22.2%, 170 basis points above the high end of our guidance, also driven by stronger volume and high associated fall-through. We reported 240 basis points of core operating margin expansion, including 570 basis points of core OMX at the iOS segment. On Slide eight, you can see that in the second quarter, we generated $282 million of free cash flow, representing a 118% conversion of adjusted net income. Free cash flow over the trailing 12 months increased 15% to $943 million. Today, our net leverage is approximately 1 time and we expect net leverage to be around 1.2 times at year end, including the funding of the acquisition of the service channel, but excluding any additional M&A. For the full year, we now expect adjusted diluted net earnings per share to be $2.65 to $2.75, representing a year-over-year growth of 27% to 32% on a continuing operations basis. This assumes total revenue growth of 13.5% to 15%, adjusted operating profit margins of 22.5% to 23.5%, and an effective tax rate of 14% to 14.5%. It also assumes total revenue growth of 8.5% to 11% in the second half of 2021. We continue to expect free cash flow conversion to be approximately 105% of adjusted net income for the full year. We are initiating third quarter adjusted diluted net earnings per share guidance of $0.62 to $0.66, representing year-over-year growth of 24% to 32%. This assumes total revenue growth of 11.5% to 14.5%, adjusted operating profit margin of 21.5% to 22.5% and an effective tax rate of 14% to 14.5%. For the third quarter, we expect free cash flow conversion to be approximately 105% of adjusted net income. During our Investor Day program on May 19, we introduced an accelerated greenhouse gas reduction goal, which now targets a reduction of 50% in greenhouse gas intensity for Scope 1 and Scope 2 emissions by 2025 relative to our 2017 base year.

For the full year, we now expect adjusted diluted net earnings per share to be $2.65 to $2.75, representing a year-over-year growth of 27% to 32% on a continuing operations basis. We are initiating third quarter adjusted diluted net earnings per share guidance of $0.62 to $0.66, representing year-over-year growth of 24% to 32%.

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Looking back on the fiscal year, revenue increased 38% versus 2020 and we delivered an EBIT margin of 3.4%, in line with our guidance. As we raised inventory levels and improved average price points in our stores, we posted a sequential sales improvement of 320 basis points in the fourth quarter. In Q4, we improved our in-stock position at the Rack by increasing the flow of inventory, making more frequent deliveries to our stores, partnering with brands to prioritize Rack deliveries and focusing our sourcing efforts on core categories that matter most to customers such as shoes and apparel. In addition to sequential improvement in our Rack banner, we saw strong enterprise digital growth of 23% versus 2019 and increased utilization of the interconnected capabilities delivered by our market strategy. Nordstrom banner sales were flat, while gross merchandise value, or GMV, increased 2% in the fourth quarter versus 2019. The Southern U.S., where 44% of our stores were located, was a source of strength for the Nordstrom banner, outperforming the Northern U.S. by approximately 7 percentage points. Notably, suburban locations outperformed our urban locations by 10 percentage points in the fourth quarter as city centers have been disproportionately impacted by the effects of the pandemic. We continue to scale the enhanced options we launched in 2020, like the expansion of order pickup and ship to store to all Nordstrom Rack locations with order pickup reaching a record high 11% of Nordstrom.com sales this quarter. For example, the average customer that shops across both banners, in-store and online spends over 12 times more than a customer utilizing a single channel and banner. Our Nordy Club loyalty program is a powerful engagement driver with 67% sales penetration in 2021. This year, remote selling sales volume increased 63% versus last year. With regard to increasing our digital velocity, we maintained strong growth at Nordstrom.com and NordstromRack.com this quarter with digital sales increasing 23% over the fourth quarter of 2019. With continued growth in digital, our total penetration has increased by 9 percentage points over the past two years to 44%. In the fourth quarter, we also saw a record high mobile app usage with mobile users representing approximately 70% of total digital traffic. And pandemic-related categories continued to outperform, particularly home and active with sales up 52 and 22%, respectively, compared to 2019 levels. Our core categories in apparel and shoes, which collectively make up more than 70% of our business, are not quite back to 2019 levels but they are recovering. We're very encouraged by the results with merchandise margins up 235 basis points over 2019, and we see more opportunity to drive additional margin improvements in '22. As a result, our ending inventory was higher than planned but we expect to cut our sales to inventory spread in half by the end of the first quarter. Our alternative partnership models have gained approximately 300 basis points as a percent of Nordstrom banner GMV since 2019, reaching 10% today. We launched over 300 new brands in partnerships this year, including Open Edit, Farm Rio, Fanatics, and ASOS DESIGN. After growing choice count by 50% this year, we entered 2022 with record-high selection. Overall, net sales increased 23% in the fourth quarter compared to the same period in fiscal 2020, and decreased 1% compared to the same period in fiscal 2019. Total revenue finished the year up 38%, in line with our guidance. In the fourth quarter, Nordstrom banner sales were flat while GMV increased 2%. Nordstrom Rack sales declined 5% in the fourth quarter, a sequential improvement of 320 basis points over the third quarter as we raised inventory levels and improved average price points in our stores. Our digital business continues to grow with fourth quarter sales increasing 23%. Gross profit as a percentage of net sales increased 340 basis points primarily due to increased promotional effectiveness, fewer markdowns, and leverage in buying and occupancy costs. Ending inventory increased 19%, with approximately half of the inventory increase due to planned investments to ensure in-stock merchandise availability. Total SG&A as a percentage of net sales increased 340 basis points in the fourth quarter as a result of continued macro-related fulfillment and labor cost pressures. These increased expenses were partially offset by continued benefits from resetting the cost structure in 2020 and a $32 million noncash asset impairment charge in 2019. EBIT margin was 6.8% of sales for the fourth quarter, an improvement of 10 basis points. For the year, EBIT margin was 3.4%, toward the high end of our guidance. We continue to strengthen our financial position, ending the year with $1.1 billion in liquidity, including $800 million fully available on our revolver a leverage ratio of 3.2 times. For the fiscal year 2022, we expect revenue growth of 5% to 7%. We expect EBIT margin of approximately 5.6 to 6% for the full year. Our effective tax rate is expected to be approximately 27% for the fiscal year. Given solid top line growth, coupled with progress on our productivity initiatives, we expect diluted earnings per share of $3.15 to $3.50 for the year, which excludes the impact of share repurchases, if any. We're planning capital expenditures at normalized levels of 3% to 4% primarily to support supply chain and technology capabilities. We are committed to an investment-grade credit rating and remain on track to decrease our leverage ratio to approximately 2.5 times by the end of 2022. Subject to completion of our year-end audit and the related certification process with our bank group, we expect to be in a position to resume returning cash to shareholders in the first quarter. Choice count is now at an all-time high with more than 300 new brands launched last year in growth and alternative partnership model, all of which position us to grow sales by delivering newness, selection and inspiration to our customers.

In Q4, we improved our in-stock position at the Rack by increasing the flow of inventory, making more frequent deliveries to our stores, partnering with brands to prioritize Rack deliveries and focusing our sourcing efforts on core categories that matter most to customers such as shoes and apparel. With regard to increasing our digital velocity, we maintained strong growth at Nordstrom.com and NordstromRack.com this quarter with digital sales increasing 23% over the fourth quarter of 2019. As a result, our ending inventory was higher than planned but we expect to cut our sales to inventory spread in half by the end of the first quarter. For the fiscal year 2022, we expect revenue growth of 5% to 7%. We expect EBIT margin of approximately 5.6 to 6% for the full year. Given solid top line growth, coupled with progress on our productivity initiatives, we expect diluted earnings per share of $3.15 to $3.50 for the year, which excludes the impact of share repurchases, if any. Subject to completion of our year-end audit and the related certification process with our bank group, we expect to be in a position to resume returning cash to shareholders in the first quarter.

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We delivered growth of more than 1.2 times the market, which exceeded our expectations for the period. We delivered sales growth of 10.5% versus 2019 and sequential volume improvements throughout the quarter until the omicron variant impacted our December performance. Our strong sales results and elevated operating expenses resulted in an adjusted earnings per share of $0.57 for the quarter. As a result, we are now confident we will exceed our 1.2 times the market growth target for the full fiscal year. Our year-to-date growth is exceeding our 1.2 times the industry target for the year and is being driven by our supply chain strength and our Recipe for Growth strategy. We also returned over $650 million of cash to our shareholders during the quarter. Here are our second quarter fiscal 2022 financial headlines as seen on Slide 9: sales growth of 41.2% compared to last year, also up 10.5% versus fiscal 2019, leading to our highest Q2 sales ever; good management of our product cost inflation, recording the highest gross profit in absolute dollar terms for any Q2 at Sysco; a doubling of adjusted operating income and a 62.9% increase in adjusted EBITDA compared to last year, notwithstanding a cost environment which worsened during the quarter; continued investment against our long-term Recipe for Growth with $44 million of operating expense investments against our strategic investments, creating momentum with our commercial capabilities; proactive action on the COVID-generated labor and safety environments in which we are operating with $73 million in transitory snapback operating investments, such as recruiting costs, hiring marketing, vaccination promotion, contract labor, and sign-on and retention bonuses in the quarter. With respect to our capital allocation, we refinanced elements of our long-term debt during the quarter, and we returned $657 million of cash to shareholders. Second quarter sales were $16.3 billion, an increase of 41.2% from fiscal 2021 and a 10.5% increase from fiscal 2019. Local case volume within the subset of USFS, our U.S. broadline operations, increased 17.6% while total case volume within U.S. broadline operations increased 22.5%. SYGMA sales were up 16.5% versus fiscal 2021 and up 15.3% versus fiscal 2019 even with the large customer rationalization we disclosed earlier, which we expect will be complete on a comparable basis following Q3. International sales were up 43% versus fiscal 2021 and down approximately 3% versus fiscal 2019. Foreign exchange rates had a positive impact of 0.3% on Sysco's sales results. We continue to monitor the impact on our customers and on our business as international restrictions are starting to ease, including in Ireland and the U.K. Inflation continued to be a factor during the quarter at approximately 14.6% in our U.S. broadline business. Gross profit for the enterprise was approximately $3 billion in the second quarter, increasing 37.8% versus the second quarter of fiscal 2021 and also exceeding gross profit in fiscal 2019 by 4%. Gross margin rate was 17.7% during the quarter with the margin rate math impacted by product inflation. Adjusted operating expense came in at $2.4 billion with a combination of planned and unexpected expense increases from the prior year really driven by four things: first, the increased variable costs associated with significantly increased volumes; second, as you can see on Slide 10, more than $73 million of one time and short-term transitory expenses associated with the snapback, which we expect to decline in the third quarter. While we have increased wages in select locations, those increases are not material and have the opportunity to be offset by productivity and cost-out improvements going forward; third, $44 million of purposeful operating expense investments against our Recipe for Growth initiatives, like personalization, digital sales tools, and assortment capabilities, which remain on track to be elevated for the rest of the year; and fourth, the productivity expense challenges Kevin referenced earlier, including ramp-up time associated with new hire productivity in our warehouses and trucks, elevated overtime and third-party labor support in the face of staff absences. Together, the snapback investments and the transformation costs totaled approximately $116 million of operating expenses this quarter and negatively impacted our adjusted earnings per share by approximately $0.17. All in, we leveraged our adjusted operating expense structure and delivered expense as a percentage of sales of 14.7%, which is flat from fiscal 2019 and down 145 basis points from fiscal 2021. Finally, for the second quarter of fiscal 2022, adjusted operating income increased $262 million from last year to $496 million. This was primarily driven by a 45% improvement in U.S. foodservice and continued progress on profitability from international partially offset by SYGMA. Adjusted earnings per share increased $0.40 to $0.57 for the second quarter compared to last year. Cash flow from operations was $377 million on a year-to-date basis, driven by our higher income and lower interest, offset by higher tax payments and a significant investment in working capital. Net capex was $175.9 million, somewhat lower than expected given increased lead times on fleet and equipment. Adjusted free cash flow year to date was $201 million. At the end of the second quarter, we had $1.4 billion of cash and cash equivalents on hand. We also commenced our share repurchase program during the second quarter and repurchased approximately 5.7 million shares for a total of $416 million at an average share price of $72.30. This was in addition to paying our quarterly dividend of $0.47 per share in October. While our track record goes back decades, as you can see on Slide 16, over the last 7 years cumulatively, we have returned over $12 billion of cash to shareholders. As a result, we are reaffirming our long-term guidance that for fiscal 2024, Sysco will deliver adjusted earnings per share growth of at least 30% over our record 2019 earnings per share of $3.55. For the full year, we expect adjusted earnings per share of approximately $3 to $3.10. This translates to adjusted earnings per share in the back half of about $1.60 to $1.70. In a typical pre-COVID fiscal year, adjusted earnings per share for our second half is generally weighted around 40% to Q3 and 60% in Q4 due to normal seasonality of our business.

Our strong sales results and elevated operating expenses resulted in an adjusted earnings per share of $0.57 for the quarter. Second quarter sales were $16.3 billion, an increase of 41.2% from fiscal 2021 and a 10.5% increase from fiscal 2019. Adjusted earnings per share increased $0.40 to $0.57 for the second quarter compared to last year.

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We talked to you about 90 days ago. So I'll try and draw comparisons to what I said 90 days back. I had an optimistic tone 90 days ago, I'm more optimistic today. About 30% of our employees are either vaccinated or about to be fully vaccinated, and many more are in line. The quarterly performance, we reported net income of about $99 million, 98.8% to be exact, $1.06 per share. This compares to $0.89 that we reported to you last quarter. And obviously, last -- this time last year, the first quarter was a loss of $0.33. We had NII of $196 million. This compares to $193 million last quarter and $181 million compared to the first quarter of last year. As we told you three months ago, we were positively biased where it came to NIM guidance, and NIM did expand from 2.33% last quarter to 2.39% this quarter. Noninterest DDA grew by $957 million, which I'm very happy about. The average noninterest DDA grew by $338 million. But the number that really makes me happy is that noninterest DDA now stands at about 29% of our total deposits. Just in December, we were at 25%. At the end of 2019, I think we were at 18%. I think we were 14% or 15%. Cost of deposits also declined by 10 basis points. Last quarter, we were at 43, we're down to 33 basis points for this quarter. And the reason I can say that is because on March 31, on a spot basis, we were already down to 27 basis points. So we're starting second quarter at 27, so the number is going to be somewhere in the mid-20s. Loans were down about $500 million. So, I think $425 million of that $505 million was directly attributable to less utilization. In terms of credit, let me go over a few things, temporary deferrals and modified loans under CARES Act -- modification under CARES Act, that total number remains stable at about 3% of the portfolio. It was 71 basis points last quarter, it's down to 67. But if you actually exclude the guaranteed portion of SBA loans, it was 53 basis points. I think last year, we were running at about 26 basis point net charge-off rate. We're down to 17 basis points this quarter. CET1 ratio is at 13.2% for holdco and 14.8% for the bank. We bought back about $7.3 million of stock this quarter. We still have a little less than $40 million left in the buyback, and we plan to execute it against a buyback opportunistically. We did declare a $0.23 dividend, and currently, we anticipate maintaining that level. Our book value per share is now at $32.83. Tangible book values at $32 even. I won't say from which bank, but it comes with $0.5 million loan and $26 million in deposits with a full suite of treasury management products. Also, let me talk a little bit about 2.0, and specifically 2.0 revenue initiatives. Deposit service charges and fees this quarter were up 17% compared to the first quarter of last year. This is -- a lot of that is coming from the 2.0 initiatives that we've put in place and more to come. Also, the small business initiatives that were also part of 2.0 are now going to pick momentum. Small business, as you can imagine, were distracted very much with PPP 1.0 and then PPP 2.0. So average noninterest-bearing deposits grew by $338 million for the quarter and by $3.1 billion compared to the first quarter of 2020. On a period-end basis, noninterest DDA grew by $957 million for the quarter, while total deposits grew by $236 million. So significantly, time deposits for the quarter declined by $1 billion. So if you look at total cost of deposits, as Raj mentioned, declined to 33 basis points for the quarter, 27 basis points on a spot basis, down from 36 as of December 31, 2020. As Raj mentioned on the loan side, we were down $505 million. We did have $234 million of growth in the residential portfolio with the EBO Ginnie Mae portion contributing $341 million. It would have contributed another $800 million of base into the C&I portfolio. We booked $265 million worth of PPP loans during the first quarter under the Second Draw Program. And in numbers of units, it's about 1/3 of what we did in the First Draw Program. On the forgiveness front, we were -- we forgave $138 million in loans during -- that were made during the First Draw Program. We have about $650 million remaining outstanding under the First Draw Program as of March 31. In commercial, only $35 million of commercial loans. We're still on short-term deferral as of March 31, $621 million of commercial loans have been modified under the CARES Act. Together, these are $656 million or approximately 4% of the total commercial portfolio, which is pretty consistent with the levels since the end of the last quarter. Not unexpectedly, the portfolio segment most impacted has been the CRE, hotel book, where $343 million or 55% of the segment has been modified, also consistent with prior quarter end. Residential, excluding the Ginnie Mae early buyout portfolio, $91 million of the loans were on short-term deferral, an additional $15 million had been modified under longer-term CARES Act repayment plans as of March 31. This totaled about 2% of the residential portfolio. Of $525 million in residential loans that were granted an initial payment deferral, $91 million or 17% are still on deferral, while $434 million or 83% have rolled off. Of those that have rolled off, 94% have either paid off or are making their regular payments at this time. We saw collection rates of 96%, which were even for both Florida and New York. Multifamily loans were at 90% collection rate in New York and 92% collection rate in Florida. And retail has continued to improve and performed pretty well at 85% in New York and 99% in Florida. Occupancy for the two hotels that are open in New York ran about 80% for March. And in Florida, occupancy rates for the entire portfolio, which is a little under 30 hotels in total, averaged 80% in March, with some reporting occupancy rates in the 90% range. So we've seen this improve from 46% last quarter, 56% in January, February was stronger, and March was up to the 80% level, and we're seeing forward forecast for most operators that continue to show strength as we get -- as we start to head toward the summer months. Planet Fitness, 100% of the stores are now open with payment systems turned on, retention is averaging 90% in that concept. So as Raj mentioned, net interest income grew this quarter, up about 1.5% from the prior quarter and up 9% from the first quarter of the prior year. The NIM increased to 2.39% this quarter from 2.33% last quarter in spite of elevated levels of liquidity on the balance sheet, so we were pleased to see that. The yield on loans increased to 3.58% this quarter from 3.55% last quarter. And $6.3 million of that relates to the First Draw Program. The yield on securities declined by nine basis points to 1.73% for the quarter. The total cost of deposits declined by 10 basis points quarter-over-quarter with the cost of interest-bearing deposits declining by 13 basis points. We do expect that to continue to decline given that the spot rate was 27 basis points at quarter end. The cost of FHLB borrowings did increase to 2.32% as the borrowings that were paid down were short-term lower rate advances compared to the hedged advances that remain on the balance sheet. In the aggregate, there's about $1.6 billion of hedged advances that are scheduled to mature over the remainder of 2021, with a weighted average rate in excess of 2%. Overall, the provision for credit losses for the quarter was a recovery of $28 million, compared to a recovery of $1.6 million last quarter, and obviously, a provision of $125 million in the first quarter of 2020, which was the quarter where we really booked our big provision related to the onset of COVID. The reserve declined from 1.08% to 0.95% of loans, and Slides nine through 11 of our deck gives some further details on the allowance. Major drivers of change, the reserve went down $36 million related to the economic forecast, again, primarily the change in unemployment. A decrease of $10.1 million due to charge-offs, most of which related to one BFG franchise loan that was having trouble even prior to COVID. A decrease of $12.8 million due to changes in the portfolio mix and the net decline in the balance of loans outstanding. $6.1 million increase in qualitative reserves. $9.6 million increase related to updates of certain assumptions, primarily updated prepayment speeds. An increase of $6.8 million related to loans that were further downgraded to the substandard accruing category. The reserve for pass rated loans declined from $137 million to $93 million, while the reserve for non-pass loans increased from $120 million to $128 million. National unemployment declining to 5% by the end of 2021 and trending down to just over 4% by the end of 2022. Real GDP growth of just over 7% by the end of 2021 and 2.3% for '22. The S&P 500 index remaining relatively stable at around 3,700 and Fed funds rates staying at or near zero into 2023. Little bit of detail on risk rating migration, and you can see a breakdown of all of this on Slides 23 through 26 in the deck. Total criticized and classified assets declined by about $75 million this quarter, but we did see some migration into the substandard accruing category from special mention. Nonperforming loans did decline this quarter, from $244 million to $234 million. Now with the exception of March where it went up 0.5 point, so it sort of went in the right direction a little bit. I was in Miami for the first time after 12 months, two weeks ago.

The quarterly performance, we reported net income of about $99 million, 98.8% to be exact, $1.06 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. A recent admission data suggests senior housing is in the process of recovery pre-pandemic nursing home base patients represented 18% of our total average daily census or ADC. The nursing of ADC ratio hit a low of 14.3% in the first quarter of 2021. In the second quarter of 2021 nursing home base patients increased 60 basis points to 14.9%. And then, the third quarter of 2021, our nursing home patients represented 15.6% of our total ABC. We've expanded technician manpower by 8% in 2021. Our average 2021 technician and field sales force compensation is over $81,000 per year. In aggregate, residential branch revenue increased 46.2% over this two-year period. On a service segment basis, residential plumbing revenue increased 37.1%; drain cleaning expanded 36%; excavation increased 65.6%; and water restoration increased 48.1%. Commercial demand has been more challenging, however, commercial revenue has experienced a significant recovery since the 40% decline in commercial demand noted in April 2020. Overall, commercial revenue declined 3.1% over this 2-year period. On an individual service segment basis, commercial plumbing service declined 4.9%, drain cleaning expanded 1.8% excavation declined 10.2%, and water restoration increased 7%. Over the past 20 years, the country has faced 9/11, the Great Recession, and now a global pandemic. Roto-Rooter is well positioned postpaid pandemic, and we anticipate continued expansion of market share, by pressing our core competitive advantages in terms of brand awareness, customer response time, 24-7 call centers and Internet presence. VITAS's net revenue was $317 million in the third quarter of 2021, which is a decline of 5.8% when compared to the prior year period. This revenue decline is comprised primarily of a 5.3% decline in days of care, partially offset by a geographically weighted average Medicare reimbursement rate increase, including the suspension of sequestration of approximately 1.2%. Our acuity mix shift had a net impact of reducing revenue approximately $3 million or nine-tenths of 1% in the quarter, when compared to the prior-year revenue and level of care mix. The combination of Medicare Cap and other contra-revenue changes, negatively impacted revenue growth, an additional 80 basis points. VITAS accrued $100,000 in Medicare Cap billing limitations in the quarter. This compares to $4.1 million reversal of Medicare Cap billing limitations in the third quarter of 2020. Of our 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 0% and 5%. Roto-Rooter, generated quarterly revenue of $221 million in the third quarter of 2021, which is an increase of $30.1 million or 15.7% when compared to the prior year quarter. Roto-Rooter's branch residential revenue in the quarter totaled $151 million, which is an increase of $22.2 million or 17.2% over our prior year period. This aggregate residential revenue growth consisted of drain cleaning, increasing 11.7%, plumbing expanding 17.4%, excavation increasing 14.1%, and water restoration increasing 28%. Roto-Rooter branch commercial revenue in the quarter totaled $52.3 million, which is an increase of $4.7 million or 10% over the prior year. The aggregate commercial revenue growth consisted of drain cleaning increasing 17.6%, plumbing increasing 9.3%, and commercial excavation declining 1.3%. Water restoration also increased 9.4%. During the quarter, we repurchased 350,000 shares of Chemed stock for $164 million, which equates to a cost per share of $467.80. As of September 30 of 2021, there is approximately $148 million of remaining share repurchase authorization under this plan. Chemed restarted its share repurchase program in 2007. Since that time, Chemed has repurchased approximately 15.2 million shares, aggregating approximately $1.7 billion, at an average share cost of $113.04. Including dividends over the same period, Chemed has returned approximately $1.9 billion to shareholders. We have updated our full-year 2021 guidance as follows: VITAS was 2021 revenue, prior to Medicare Cap, is estimated to decline approximately 5% when compared to the prior year period. Average daily census in 2021, is estimated to decline 5.5%. In our full-year adjusted EBITDA margin, prior to Medicare Cap, is estimated to be 18.8%. We're currently estimating $6.6 million for Medicare Cap billing limitations release calendar year 2021. Roto-Rooter is forecasted to achieve full-year 2021 revenue growth of 17.3%. Roto-Rooter's adjusted EBITDA margin for 2021 is estimated to be between 28.5% and 29%. Based on the above full-year 2021 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, cost related to litigation and other discrete items, is estimated to be in the range of $19 to $19.20. This compares to our initial 2021 adjusted earnings guidance per diluted share of $17 in $17.50. This revised 2021 guidance assumes an effective corporate tax rate on adjusted earnings of 25.1%. This compares to Chemed's 2020 reported adjusted earnings per diluted share of $18.8. In the third quarter, our average daily census was 18,034 patients, a decline of 5% over the prior year and 0.2% increase when compared to the second quarter of 2021. In the third quarter of 2021, total VITAS admissions were 17, 598. This is a 1.9% decline when compared to the third quarter of 2020 admissions and a 4.5% sequential increase when compared to the second quarter of 2021. In the third quarter, on a year-over-year basis, our hospital directed admissions declined 0.8%. Total home-based pre-admit admissions decreased 8.3%, nursing home admits declined 0.2%, and assisted living facility admissions declined 8.6%. When you compare our third quarter 2021 admissions to the second quarter of 2021, we generated solid sequential improvement with hospital directed admissions improving 2%, total home based pre-admit admissions increasing 16.3%, nursing home admits expanding 8.9%, and assisted living facility admissions increasing 5% sequentially. Our average length of stay in the quarter was 96 days. This compares to 97.1 days in the third quarter of 2020 and 94.5 days in the second quarter of 2021. Our median length of stay was 13 days in the quarter and compares to 14 days in the third quarter of 2020, and is equal to the second quarter of 2021.

Based on the above full-year 2021 adjusted earnings per diluted share, excluding non-cash expense for stock options, tax benefits from stock option exercises, cost related to litigation and other discrete items, is estimated to be in the range of $19 to $19.20.

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The key takeaways from our fourth quarter and full year 2020 results are: fourth quarter sales were down 3.8%, record full year sales were up 4% with the help of acquisitions, but down 11% without. Fourth quarter net income and earnings per share were down 16% from the prior fourth quarter on a GAAP basis and down about 6% on an adjusted basis. Full year net income and earnings per share were down 10% from prior year on a GAAP basis, but increased more than 2% year-over-year on an adjusted basis. Full year adjusted EBITDA was up 11.6% from the prior year and essentially flat to the third quarter trailing 12-month result with adjusted EBITDA margins expanding by nearly 100 basis points over prior year. Record full year operating cash flow of $184.3 million was up 108% over prior year, and fourth quarter operating cash flow exceeded an unusually strong operating cash flow performance in the prior year quarter. Outstanding debt was reduced by $158.6 million in 2020, and our debt net of cash position improved by $166.5 million during the year. Record backlog of $354.1 million was up 35.6% over the prior year-end. Fourth quarter 2020 net sales of $288.6 million or 3.8% lower than the prior year quarter. Full year 2020 net sales of $1.16 billion were a Company record and 4% higher than the prior year with the contribution of the Morbark and Dutch Power acquisitions. Without these acquisitions, organic sales were down 11% from prior year. Net income for the fourth quarter was $8 million or $0.68 per diluted share compared to prior year fourth quarter net income of $9.6 million or $0.81 per diluted share. Excluding the Morbark inventory step-up expense, severance cost related to a plant closure, one-time acquisition transaction cost and acquisition-related amortization expense, adjusted fourth quarter 2020 net income was $13 million or $1.10 per diluted share compared to $13.8 million or $1.18 per diluted share in the prior year quarter. Net income for full year 2020 was $56.6 million or $4.78 per diluted share compared to net income of $62.9 million or $5.33 per diluted share for the prior year. Excluding the full year impact of the adjustments I just mentioned in the quarter comparison, adjusted full year net income was $70.3 million or $5.94 per diluted share compared to $68.4 million or $5.80 per diluted share in the prior year. Industrial Division fourth quarter 2020 net sales of $202.7 million represented an 8.9% decrease from the prior year quarter due to the pandemic-related impact on customer demand and disruptions to our supply chain and operations. Agricultural Division fourth quarter 2020 sales were $85.9 million, up 10.5% from the prior year fourth quarter. Full year 2020 adjusted EBITDA was $145.2 million, up $15.1 million or about 11.6% over the prior year and was essentially flat to the third quarter trailing 12-month results. Our adjusted 2020 EBITDA as a percentage of net sales improved by nearly 100 basis points over prior year. During 2020, we generated $184.3 million of operating cash flow compared to $88.8 million in the prior year, an increase of 108%. We ended the fourth quarter with a record $354.1 million in order backlog, an increase of over 35% since the prior year-end. To recap our fourth quarter and full year 2020 results, fourth quarter sales down 3.8%; record full year sales, up 4%, but down 11% without acquisitions; fourth quarter net income and earnings per share down 16% on a GAAP basis and down 6.8% on an adjusted basis; full year adjusted EBITDA up 11.6% from prior year and essentially flat to the third quarter trailing 12-month result with adjusted EBITDA margins expanding by nearly 100 basis points over prior year; record full year operating cash flow, up 108% over prior year with favorable comparisons continuing in the fourth quarter; full year debt reduction of almost $159 million and debt net of cash improvement over $166 million; and record backlog, up more than 35% over the prior year-end. We're particularly pleased to see that the momentum, which we have -- which has been building for the last several quarters, really since the slowness in the -- the end of this -- in the second quarter and -- but it's built in the third, continued into fourth and with strong bookings and a record backlog at the end of the year, and I'm pleased that this trend has continued even into the first quarter of 2021 with our backlog continuing to grow even further, and now it's over $400 million.

Record backlog of $354.1 million was up 35.6% over the prior year-end. Fourth quarter 2020 net sales of $288.6 million or 3.8% lower than the prior year quarter. Net income for the fourth quarter was $8 million or $0.68 per diluted share compared to prior year fourth quarter net income of $9.6 million or $0.81 per diluted share. Excluding the Morbark inventory step-up expense, severance cost related to a plant closure, one-time acquisition transaction cost and acquisition-related amortization expense, adjusted fourth quarter 2020 net income was $13 million or $1.10 per diluted share compared to $13.8 million or $1.18 per diluted share in the prior year quarter.

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Last night we reported third quarter operating earnings of $0.42 per share. In a quarter that was impacted by a number of severe hurricanes, we achieved 9% top line growth and posted a 99.5 combined ratio. Positive net earnings drove book value per share up 13% for the year inclusive of dividends to end the quarter at $24.40. Pricing momentum continued in a number of our products and the pandemic's influence was modest this quarter with casualty posting 11% top line growth, where property and surety were up 8% and 1% respectively. Recorded losses from hurricanes Hanna, Isaias, Laura and Sally are within our pre-announced range and stand at $39 million net of reinsurance. $35 million of that is from our property segment and $4 million impacted casualty where a number of our package policies are reported. Net of bonus related impacts, these losses totaled $33.2 million or $0.58 per share net of tax and added 15 points to the quarter's combined ratio. Overall, the quarter's loss ratio was 58.9. This resulted in recording $4 million in COVID-19-related losses, $3 million in casualty and $1 million in surety. Year-to-date reserves established for COVID-19 totaled $15 million. By segment amounts recorded totaled $2 million for property, $3 million for surety and $10 million for casualty. Offsetting reserve additions in the quarter were approximately $25 million in net benefits from prior year's reserve releases. By segment, casualty totaled $19 million with the majority of products posting favorable experience. Surety posted $3 million of benefits and property was $3 million, inclusive of some reductions in prior year's storm losses. Our quarterly expense ratio remained below last year, down 1.3 points to 40.6. Despite some September volatility for equities the portfolio again produced positive results and a 2.2% total return. As Todd mentioned, we were able to grow top line 9% and still deliver a small underwriting profit for the quarter despite significant headwinds. 2020 has been an unprecedented year to say the least, with 10 named storms making landfall in the Continental US, wildfires across a large portion of the West, a derecho in the Midwest, civil unrest in many cities and an ongoing global pandemic. In casualty, we were able to grow 11% while reporting a 90 combined ratio. Rates are up 10% across the segment driven by excess liability coverages and automobile exposures. Our commercial excess liability rates were up about 11% for the quarter, while our executive product rates were up more than 35%. Our personal umbrella business also continues to grow with more than a 50% increase for the quarter and year-to-date from investments made in technology, new and existing distribution partners as well as market disruption. Our transportation business continues to be challenged on the top line shrinking 8% for the quarter and off more than 40% year-to-date, largely driven by the negative impact that COVID-19 has had on the chartered transit and school bus sector. Casualty market dynamics do appear bifurcated in that primary casualty products with limits of $1 million or less, many construction risks and workers' compensation still remain very competitive. For RLI this includes about 35% of our casualty portfolio represented by products like small professional liability, admitted and non-admitted general liability and package policies. In property, we achieved 8% growth but reported a sizable underwriting loss as a result of the four named storms we experienced during the quarter. For the entire property segment, rates are up about 14% for the quarter and 12% year to date. Wind-only rates are up over 40% in the quarter, which is the fifth consecutive quarter we have achieved increasing price momentum. Our overall exposures have remained relatively flat while growing our property premium about 10% year to date. The surety segment was able to grow 1% reported, an impressive 75 combined ratio for the quarter.

Last night we reported third quarter operating earnings of $0.42 per share. Net of bonus related impacts, these losses totaled $33.2 million or $0.58 per share net of tax and added 15 points to the quarter's combined ratio.

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Fortunately for Walker & Dunlop, we have benefited and generated record revenues of $253 million during the quarter, on the back of exceedingly strong loan origination and property sales volume of $7.1 billion. Our recorded loan and origination volume of $6.7 billion coupled with our Q1 lending volume of $9.6 billion, catapulted Walker & Dunlop's market share, total commercial real estate lending in the United States for the first half of 2020% to 13.2%, nearly tripling our market share from last year. All these investments in people, technology and branding, came together in Q2 2020 to generate 26% year-over-year growth in revenues, and 47% year-over-year growth in diluted earnings per share to $1.95, in the midst of the global pandemic, when our entire team was working remotely. And if record revenue growth explosive earnings were not enough, we added a record net $5.2 billion of servicing from loan originations to our portfolio during the quarter, pushing our servicing portfolio to $100 billion at the end of July, and officially achieving the first pillar of our highly ambitious five-year strategic growth plan entitled Vision 2020. Revenue growth of 26% during the quarter and our debt brokerage and property brokerage businesses were significantly curtailed, highlights the volume of lending we did with the GSEs and HUD. We originated $4.5 billion of financing with Fannie Mae and Freddie Mac in the second quarter, increasing our market share with the GSEs from 10% last year, up to 14% through the first half of 2020. Our partnership with Fannie Mae, which dates back to 1988, has had an incredible year, with Walker & Dunlop representing 20% of Fannie Mae's total multifamily lending volume for the first half of the year. $5.2 billion of new loans into our servicing portfolio, during a quarter when we originated $6.7 billion in total financing; means, we were not simply refinancing loans that already existed in our servicing portfolio, but rather taking business from our competition and bringing in new clients into Walker & Dunlop. As slide 6 shows, we had strong growth in our Fannie and Freddie origination volumes in Q2, and as the middle column shows, we had explosive growth with HUD this quarter, growing from $190 million of loan originations in Q2 of 2019, to $640 million loan originations this quarter, by far our largest HUD quarter ever. First, Sheri Thompson joined Walker & Dunlop 18 months ago to lead our HUD business, and has done an absolutely magnificent job, taking our team from being a market leader to being the leader in HUD financing. Finally, as you can see just to the right of the HUD volumes, we've brokered $1.5 billion of debt to third parties during Q2. That number is down 23% from Q2 2019, but still very strong, given the dislocation in place in the markets. It is noteworthy, that the New York-based debt brokerage team we added in Q1 was responsible for 26% of our total brokered volume in Q2, quite an accomplishment for first quarter at Walker & Dunlop, particularly considering they are based in the epicenter of the early COVID crisis. We closed $447 million of sales volume in Q2, a slow quarter for our team, but we were seeing the market pick back up and currently have 33 properties worth $1.4 billion under contracts for closing in Q3 and Q4. Vision 2020 was established in 2016 with very ambitious five-year goals, $30 billion of annual debt financing, $8 billion of annual investment sales, $8 billion in assets under management and $100 billion of loans in our servicing portfolio, which if achieved, would drive $1 billion in annual revenues. As the left hand side of this next slide shows, we established the debt financing goal of $30 billion after originating $16.2 billion of debt financing in 2015 and on a trailing 12 month basis, as you can see in the last column of this chart, we have achieved our Vision 2020 debt financing goal by originating $31.4 billion of loans, which is a five-year compound annual growth rate on loan originations of 14%. Similarly in the right side of this slide shows the growth in property sales, from established goal selling $8 billion in multifamily properties, after selling $1.5 billion in 2015, to selling $5.8 billion over the last 12 months. While the pandemic has clearly slowed down our property sales business, we have grown this business at a compound annual growth rate of 31% over the past five years and have, built an absolutely incredible team. I mentioned previously, the growth in our servicing portfolio to $100 billion and as this slide shows, over the past five years, we have grown the portfolio from $50.2 billion in 2015 to $100 billion today, at a compound annual growth rate of 15%. The dramatic growth in loan originations, property sales, and servicing, have grown revenues, as you can see on the right side of this slide, from $468 million in $2015 to $916 million over the past 12 months, or at a compound annual growth rate of 14%. So all of this brings us close, but not quite to our Vision 2020 goal of $1 billion in annual revenues, which we will continue chasing for the remainder of this year. As Steve will discuss, we took a large loan loss reserve in Q1 to incorporate the expected impacts recorded and added another $5 million to that reserve in Q2. For example, our client email database was 19,000 people prior to the COVID pandemic. Today, it is over 120,000 email addresses. Our media outreach has exploded, having Walker & Dunlop mentioned in 129 press articles in target publications during Q2, an all-time record by over 55%. Q2 total transaction volume of $7.1 billion, included a significant year-over-year increase in our Fannie Mae loan originations, which drove the 26% year-over-year increase in total revenues, to a quarterly record of $253 million. Second quarter net income of $62 million and diluted earnings per share of $1.95, were both up 47% from Q2 '19. Second quarter total debt financing volume of $6.7 billion was led by $2.8 billion of Fannie Mae originations. For the second consecutive quarter, Fannie Mae originations comprised over 40% of debt financing volume, which along with our robust HUD originations, pushed gain on sale margin to 252 basis points, well above our forecast range of 170 basis points to 200 basis points. Our HUD business is poised for a breakout year in 2020, having originated $640 million in the quarter and with a strong pipeline for the rest of the year, while debt brokerage volumes will likely continue to be constrained by the current economic environment. Anticipating the shift to more Freddie Mac originations in Q3, we expect gain on sale margin to be in the range of 190 basis points to 210 basis points for the quarter. Our scaled business model continues to produce healthy key financial metrics, with second quarter operating margin of 33% and return on equity of 23%, both well above the top end of our target ranges of 30% and 20% respectively. Personnel expense as a percentage of revenue was 42%, due to an increase in variable expenses for commissions and bonus, driven by the strong performance during the quarter. Variable compensation expense was 60% of our total personnel costs during the quarter. And finally, year-to-date revenue per employee has increased to over $1.1 million, as revenue growth has outpaced the hiring of new employees. Our strong debt financing volumes in the first half of the year have enabled us to grow our servicing portfolio by more than $6.5 billion in the last six months and our servicing portfolio ended the quarter at just $12 million below the $100 billion mark. As Willy, mentioned we have since crossed over $100 billion, successfully achieving an important pillar of our Vision 2020 goals. The portfolio continues to fuel strong cash revenues, with record servicing fees totaling $57 million in Q2. Additionally, the record mortgage servicing rights revenues of $90 million in the quarter, which were more than double those of Q2 '19, will translate into higher cash servicing fees in the future. Turning now to liquidity, we continue to strengthen the balance sheet, increasing our available cash on hand, from $205 million at the end of Q1 to $275 million at the end of June. Adjusted EBITDA in the quarter was $48.4 million, down from $62.6 million in the year ago quarter. The decline was driven primarily by the impact of low short-term interest rates on our escrow earnings, which declined by $12 million year-over-year. Our average escrow balances at the end of June were $2.2 billion, which will drive significant upside to earnings and adjusted EBITDA, if interest rates start to rise. The advanced line is structured as a $100 million supplement to an existing agency warehouse line, and may be used to fund advances of principal and interest payments on loans that are in forbearance or are delinquent within our Fannie Mae DUS portfolio. The facility provides 90% of the principal in interest advance payment, at a rate of LIBOR plus 175, and is collateralized by Fannie Mae's commitment to repay the advances. Through the end of July, we had only nine Fannie Mae loans, totaling $261 million that took forbearance, which is less than 60 basis points of our Fannie Mae portfolio and we have granted no new requests since May. During the quarter, we took an additional $5 million provision expense, to increase our allowance for credit obligations related to our at-risk Fannie Mae portfolio. Our allowance now stands at just over $69 million or 17 basis points of our at-risk portfolio. With respect to our interim loan portfolio, we reduced our allowance by $200,000 during the quarter, due to the overall decrease in the size of the portfolio, which declined from $458 million at March 31, to $408 million at the end of June. So far this year, we've reduced the portfolio by 25%. Inclusive of the interim loans in the Blackstone JV, we've had 12 loans, totaling $240 million, either rate lock or pay-offs so far this, year reducing the risk profile significantly. And of those 12 loans at rate locked or paid off, we refinanced 10 of them with third party capital, mostly Fannie and Freddie, for over $290 million in permanent loan financing, achieving exactly the objective we have always had for the interim lending program. Our strong financial results for the first half of the year and the pipeline of business we see for Q3, have put us back on track to achieving our annual operating margin and return on equity goals of 28% to 30%% and 18% to 20% respectively, and we believe double-digit earnings per share growth for 2020 is now achievable. In addition, our robust capital and liquidity position give us great confidence in maintaining our dividend, as the Board approved a $0.36 dividend per share for the quarter, payable to shareholders of record as of August 21. And our team of 900 employees took it upon themselves, to figure out how to inspect properties, receive appraisals, close loans and continue providing the exceptional service to our customers, this is expected to Walker & Dunlop each and every day. And with multifamily comprising close to 80% of total commercial real estate financing volumes so far this year, we are extremely well positioned to be one of the largest providers of capital to the commercial real estate industry over the coming years. As I ran through Vision 2020 on a trailing 12 month basis, I did not discuss our asset management business, which as we started at the end of -- to as we stated at the end of 2019, is not going to achieve the 2020 Vision goal of $8 billion of AUM. First our AUM of $1.9 billion comprises three components; equity capital, invested in a broad array of commercial property types by JCR Capital; debt capital we lend on behalf of life insurance companies through separate accounts; and multifamily bridge loans we originate into our joint venture with Blackstone Mortgage Trust. During Q2, we reached an agreement with a large Canadian pension fund to provide up to $250 million of preferred equity capital on multifamily deals, where we are originating first trust mortgage financing with Fannie Mae or Freddie Mac. The loans we are currently originating, carry with them significant servicing fees, demonstrated by our 252 basis point gain on sale margin in Q2. As you can see in our net income and EBITDA numbers, we are generating a huge amount of non-cash revenue in mortgage servicing rights, that will convert into cash revenues over the next seven, 10 and even 40 years, depending on the life of the loan. And finally, at some point, interest rates will begin to rise, and we will generate substantial cash interest income off our $2.2 billion in escrow deposits. But never in my 17 years at the company, have I seen how good we truly are, demonstrated so dramatically.

All these investments in people, technology and branding, came together in Q2 2020 to generate 26% year-over-year growth in revenues, and 47% year-over-year growth in diluted earnings per share to $1.95, in the midst of the global pandemic, when our entire team was working remotely. Q2 total transaction volume of $7.1 billion, included a significant year-over-year increase in our Fannie Mae loan originations, which drove the 26% year-over-year increase in total revenues, to a quarterly record of $253 million. Second quarter net income of $62 million and diluted earnings per share of $1.95, were both up 47% from Q2 '19.

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According to the National Venture Capital Association, funding totaled $35.8 billion through September 2021, already exceeding the full year of 2020. The pipeline of late-stage molecules continues to expand and is at an all time high with almost 3,000 molecules in active Phase II or Phase III development. Clinical trial starts are trending well ahead of recent years with year-to-date starts up 23% over 2020 and 13% over 2019. And finally, new drug approvals by the FDA are keeping pace with the historically high levels of 2020 with 40 new drugs approved year-to-date, which sets the stage for a strong volume of upcoming commercial launches. Revenue for the third quarter grew 21.7% on a reported basis and 21.1% at constant currency and was $64 million above the midpoint of our guidance range. Third quarter adjusted EBITDA grew 20.5% reflecting our revenue growth, as well as productivity measures. The $8 million [Phonetic] beat above the mid-point of our guidance range was entirely due to the stronger operational performance. Third quarter adjusted diluted earnings per share of $2.17 grew 33.1% that was $0.07 above the midpoint of our guidance with the beat coming from the adjusted EBITDA drop through, as well as favorability in below the line items. For example, we had a recent major win to deliver an external comparator in a cardiovascular study for top 20 pharma clients. We had 10 new client wins in the quarter, bringing the total number of OCE wins to-date to 169 customers. We now have 165 customers that have bought the site portal module, representing 155,000 sites and 1,716 active studies that are using our site portal module. We have successfully deployed over 150 projects across 35 different therapeutic areas. To date, we have over 70 customers using this platform, including eight of the top 10 pharma clients. The platform has processed over 10 million unique patient responses in 65 countries and across 28 languages. When we step back and look at the growing importance of DCT in our own portfolio, we find that up to 30% of our active full service trials utilize one or more components of our DCT Offering. We've been awarded 89 trials to-date, totaling over $1 billion. These awards are with 34 unique sponsors of which 10 have multiple decentralized trials ongoing with us. These trials spent 12 different therapeutic areas, 32 unique indications and have recruited over 200,000 patients in 40 countries, our ability to combine advanced clinical technology with an extensive network of investigators and care professionals differentiates us in this space and makes us the partner of choice for decentralized trials that utilize the full capabilities. We had approximately $2.6 billion of net new bookings in the quarter, bringing our LTM net new bookings for the first time to over $10 billion including pass-throughs. This resulted in a contracted net book-to-bill ratio of 1.39 including pass-throughs and 1.28 excluding pass-throughs. At September 30, our LTM contracted book-to-bill ratio was 1.38 including pass-throughs and 1.37 excluding pass-throughs. Our contracted backlog in R&DS including pass-throughs grew 12.7% year-over-year to $24.4 billion at September 30, 2021. As a result, our next 12 months revenue from backlog increased to $6.9 billion, up $300 million sequentially versus the second quarter. We recently announced the opening of our new 160,000 square foot Innovation laboratories in North Carolina. And this expansion of course comes on top of the investment we announced last quarter in our 130,000 square foot facility in Scotland. Third quarter revenue of $3,391 million grew 21.7% on a reported basis and 21.1% at constant currency. Year-to-date revenue was $10,238 million, growing at 27% reported and 25% at constant currency. Technology & Analytics Solutions revenue for the third quarter was $1,337 million, which was up 10.8% reported and 9.9% at constant currency. Year-to-date, Technology & Analytics Solutions revenue was $4,038 million, which was up 17.6% reported and 14.9% at constant currency. In the third quarter, R&D Solutions had revenue of $1,853 million, up 32.4% at actual FX rates and 31.9% at constant currency. Excluding the impact of pass-throughs, third quarter R&DS revenue grew 24.7% year-over-year. Year-to-date revenue in R&D Solutions was $5,612 million, up 37.7% reported and 36.2% at constant currency. Finally Contract Sales & Medical Solutions or CSMS revenue of $201 million was up 12.3% reported and 12.8% at constant currency. Year-to-date CSMS revenue was $588 million, growing 6.5% reported and 5.1% at constant currency. And let's move down the P&L to adjusted EBITDA, which was $728 million in the third quarter, up 20.5%, year-to-date adjusted EBITDA was $2,194 million, growing 33.1% year-over-year. Third quarter GAAP net income was $261 million and GAAP diluted earnings per share with $1.34. Year-to-date, we had GAAP net income of $648 million or $3.32 of earnings per diluted share. Adjusted net income was $423 million for the third quarter and adjusted diluted earnings per share grew 33.1% to $2.17. Year-to-date adjusted net income was $1,264 million or $6.48 per share. Backlog now stands at $24.4 billion. In last 12 months, net new bookings including pass-throughs rose to over $10 billion. At September 30th, cash and cash equivalents totaled $1.5 billion and debt was $12.2 billion. This resulted in net debt of $10.7 billion. Our net leverage ratio at September 30th came in at 3.65 times trailing 12 month adjusted EBITDA. Cash flow from operations was $844 million and with capex of $162 million, this resulted in free cash flow of $682 million. This third quarter performance brought our free cash flow year-to-date, that is through the first three quarters to almost $128 billion, which continues the strong improvement trend we've had over the past three years. In the quarter, we repurchased $125 million of our shares, which leaves us with $697 million of share repurchase authorization remaining under our latest program. As you saw, we're raising our full-year 2021 revenue guidance by $188 million at the midpoint, this reflecting the third quarter strength and the continued operational momentum in our business. Our new revenue guidance is $13,775 million to $13,850 million, representing year-over-year growth of 21.3% to 21.9%. Of note that included in this guidance is a $30 million headwind from FX versus our previous guidance. Now looking at the comparison to the prior year, FX is a tailwind of about 120 basis points to full-year revenue growth. We've increased our full-year adjusted EBITDA guidance by $20 million at the midpoint. Our new full-year guidance is $2,980 million to $3,010 million, which represents year-over-year growth of 25% to 26%. Moving down to EPS, we're increasing our adjusted earnings per share guidance by $0.10 at the midpoint. The new guidance range is now $8.85 to $8.95, which represents year-over-year growth of 37.9% to 39.4%. Fourth quarter revenue is expected to be between $3,537 million and $3,612 million, representing growth of 7.2% to 9.5%. FX in the quarter is a headwind to growth of about 100 basis points. Adjusted EBITDA in the fourth quarter is expected to be between $786 million and $816 million, up 6.9% to 11% and adjusted diluted earnings per share is expected to be between $2.37 and $247, growing 12.3% to 17.1%. R&DS backlog improved to $24.4 billion, that's up 12.7% year-over-year, next 12 months revenue from backlog increased to $6.9 billion, up $300 million sequentially versus the second quarter. We reported another strong quarter of free cash flow, which at $1.8 million through the first three quarters of the year is a market improvement over prior year.

Third quarter adjusted diluted earnings per share of $2.17 grew 33.1% that was $0.07 above the midpoint of our guidance with the beat coming from the adjusted EBITDA drop through, as well as favorability in below the line items. Third quarter revenue of $3,391 million grew 21.7% on a reported basis and 21.1% at constant currency. Third quarter GAAP net income was $261 million and GAAP diluted earnings per share with $1.34. Adjusted net income was $423 million for the third quarter and adjusted diluted earnings per share grew 33.1% to $2.17. Fourth quarter revenue is expected to be between $3,537 million and $3,612 million, representing growth of 7.2% to 9.5%. Adjusted EBITDA in the fourth quarter is expected to be between $786 million and $816 million, up 6.9% to 11% and adjusted diluted earnings per share is expected to be between $2.37 and $247, growing 12.3% to 17.1%.

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We finished the third quarter with record adjusted earnings per share from continuing operations of $1.89 up 103% compared to last year along with extremely strong adjusted operating margins of 16.8%. We delivered adjusted core sales growth of 19% with a number of strong leading indicators reflected in core order growth of 31% and core backlog growth of 13% compared to last year. Based on this performance, we are raising our adjusted earnings per share from continuing operations guidance by $0.35 to a range of $6.35 to $6.45, which is effectively our 5th guidance increase this year. Remember that our original guidance for 2021 was $4.90 to $5.10 and that guidance included $0.44 of earnings contribution from Engineered Materials. That means we have effectively raised guidance more than $1.80 on a comparable basis since January. Compared to 2020 on a like-for-like basis excluding Engineered Materials in both periods, our current guidance midpoint of $6.40 compares to 2020 earnings per share of approximately $3.52 reflecting more than 80% year-over-year earnings per share growth. The midpoint of the updated guidance at $6.40 is well above our prior peak pre-COVID adjusted earnings per share of $6.02 in 2019, but with some notable differences this year compared to 2019. Again, the $6.02 in 2019 included earnings contribution from Engineered Materials, which is now classified as discontinued operations and excluded from our '21 guidance. And thinking about 2022 and beyond, it is worth noting that the commercial side of our Aerospace Electronics business in 2021 will still be approximately $150 million in sales and approximately $80 million in operating profit below 2019 levels this year, and the recovery to pre-COVID levels in this business alone will add about $1 per share to EPS. At Payment & Merchandising Technologies, Crane Payment Innovations will be $200 million below pre-COVID levels in 2021 with more than half of that amount in our very high margin Payment Solutions business. We have demonstrated an ability to balance those objectives extremely well, delivering on margins and free cash flow while maintaining 100% of our investments in strategic growth initiatives throughout the entirety of the pandemic. At our May Aerospace & Electronics Investor Event we showed you numerous examples of how we continue to effectively drive above market growth and our expectation of a 7% to 9% sales compound average growth rate over the next ten years. And that was one of the key factors behind our newly announced $300 million share repurchase authorization. At Aerospace & Electronics, sales of $169 million increased 7% compared to last year. Segment margins improved 370 basis points to 19.3%. In the quarter, total aftermarket sales continued to gain momentum and increased 24% compared to last year after 3% of growth last quarter. On the military side, spares and repair both improved in the 10% range but military modernization and upgrade sales were lower. Commercial OE sales increased 31% in the quarter following 4% growth last quarter. On a year-to-date basis, defense OE sales are down 6% after three years of double-digit growth. Given our strong position in major project -- projects that we have already won that will be ramping up over the next few years we remain confident in our ability to grow our defense business at a high single-digit CAGR from 2021 through 2030. On a full-year basis at Aerospace & Electronics, we should close the year with sales just down very slightly compared to last year and with margins above 7.16% both well ahead of our original guidance for this year. For example, during the third quarter we were selected for a $60 million program over a 15 year life with our advanced high accuracy, high performance, pressure sensing technology for a newly targeted adjacent multiplatform turbofan engine application. For example, within the last month we were awarded a $20 million contract for a low Earth orbit satellite constellation using a version of our multi-mix microwave technology with most production sales expected in 2023. That gave us the confidence to share our 7% to 9% sales CAGR target at last May's Investor Day event. Process Flow Technologies, sales of $299 million increased 19% driven by a 16% increase in core sales and a 3% benefit from favorable foreign exchange. Process Flow Technologies operating profit increased by 60% to $46 million. Operating margins increased 410 basis points to $15.5%, primarily reflecting higher volumes, favorable price cost dynamics and strong execution and productivity. Sequentially, FX-neutral backlog increased 3% and with FX-neutral orders down 5%. Compared to the prior year, FX-neutral backlog increased 14% and FX-neutral core orders increased 20%. For pharmaceuticals we are seeing a number of projects we started after being put on hold, given the intense focus on vaccine production over the last 18 months. Typically it takes years after launch to get customer approvals for a new valve design, but we believe we are on track for $5 million of sales next year, growing to $30 million within five years. Also on the process side, our tough seat metal seated ball valve launched earlier this year focused on slurry and high cycle applications with a superior design that gives a valve a 50% longer life. We are on track for about $3 million of sales this year, which should double in 2022. We also have exciting developments in our municipal pump business, our chopper pump which we introduced in 2018 reduces clogging and cut -- cuts maintenance costs by 75%. That value proposition is driving 30% growth this year, and we are adding about 10 new customers each month to our existing base of approximately 250 municipalities. For Process Flow Technologies overall, our full year outlook continues to improve with full-year margins in the mid 14% range, full year core sales growth in the low double digits, a 4% FX benefit, and the $5 million of contribution from acquisitions that we saw in the first quarter. At Payment & Merchandising Technologies, sales of $366 million in the quarter increased 31% compared to the prior year, driven by 29% core sales growth and a 2% benefit from favorable foreign exchange. Segment operating profit increased 87% to $83 million. Operating margins increased 680 basis points to 2.26%. For customized self checkout solutions, our current funnel of opportunities is now approximately $185 million, double the size it was at the end of 2020. To put this higher demand into perspective, our funnel of Paypod opportunities today is approximately $13 million, more than four times the size it was at the end of 2019 and more than twice the size it was at the end of last year. We are now seeing the European and Latin American casinos beginning to recover lagging about 9 to 12 months behind North America. In our international business, our expanding portfolio of micro optic security products has helped us double the rate of new denominations secured compared to prior years with 15 new denominations won to date this year from a wide range of countries across the Caribbean, Northern and Eastern Europe, Asia, Africa and the Middle East. We are winning as central banks realize that our technology is more secure and difficult to counterfeit and because it is completely customizable and can be integrated into innovative and stunning banknote designs, such as the new Bahamas $100 banknote. This is an extremely exciting potential opportunity that opens a new $800 million addressable market to us. We now expect full year margins in the 22% range at or above the high end of our long-term target range of 18% to 22%. Full year core sales growth is now expected to be in the high teens with a 3% favorable FX benefit. We have had extremely strong cash flow performance year-to-date with free cash flow of $286 million compared to $177 million last year. As a reminder, on May 24th we announced that we had signed an agreement to sell our Engineered Materials segment for $360 million. When the transaction closes we expect proceeds net of tax to be approximately $320 million. And at the end of the third quarter, we had approximately $450 million of cash on hand. By the end of the year we expect adjusted gross leverage toward the bottom end of the two to three times range target for our current credit rating, and we estimate that by year-end we will have approximately $1 billion of additional capacity. As Max mentioned, we announced Board authorization for $300 million share repurchase program. Turning to guidance, as Max explained we are raising our adjusted earnings per share guidance by $0.35 to a range of $6.35 to $6.45 reflecting continued excellent execution and stronger end markets. First, we now expect a tax rate of approximately 17.5% compared to our prior guidance of 20.5%. The lower tax rate is a roughly 23% -- $0.23 per share benefit compared to prior guidance. We continue to expect a tax rate of approximately 21% on a normalized basis. Second, we now expect corporate cost of approximately $90 million, $10 million or $0.13 per share higher than our prior guidance. Third, the core operational improvement reflected in the guidance is approximately $0.25 per share compared to the prior guidance. This improvement reflects strong leverage on sales now forecast at $50 million higher, with full year core sales guidance up 300 basis points to a range of 10% to 12%, partially offset by FX translation down 100 basis points to an approximate 2.5% benefit. Fourth, in addition to raising the midpoint of our guidance range we narrowed the range from $0.20 per share to $0.10 per share, reflecting both how close we are to the end of the year as well as ongoing supply constraints that are likely to cap further upside this year. We also increased free cash flow guidance to a range of $340 million to $365 million, up 17.5 million from prior guidance at the midpoint, reflecting higher earnings and lower capex now forecast at $60 million.

We finished the third quarter with record adjusted earnings per share from continuing operations of $1.89 up 103% compared to last year along with extremely strong adjusted operating margins of 16.8%. Based on this performance, we are raising our adjusted earnings per share from continuing operations guidance by $0.35 to a range of $6.35 to $6.45, which is effectively our 5th guidance increase this year. And that was one of the key factors behind our newly announced $300 million share repurchase authorization. As Max mentioned, we announced Board authorization for $300 million share repurchase program. Turning to guidance, as Max explained we are raising our adjusted earnings per share guidance by $0.35 to a range of $6.35 to $6.45 reflecting continued excellent execution and stronger end markets. We continue to expect a tax rate of approximately 21% on a normalized basis. This improvement reflects strong leverage on sales now forecast at $50 million higher, with full year core sales guidance up 300 basis points to a range of 10% to 12%, partially offset by FX translation down 100 basis points to an approximate 2.5% benefit.

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Private Securities Litigation Reform Act of 1995. The announced dividend of $0.15 per share represents a dividend yield of around 8% based on closing price yesterday, and this is our 67th consecutive quarter with dividends. In light of the continued uncertainty surrounding Seadrill and outcome of their pending financial restructuring, the Board decided to adjust the dividend down to $0.15 and thereby effectively exclude all contribution from offshore rigs for the time being. We believe that the market has already discounted this in the SFL share price as we, prior to this dividend adjustment, were trading at more than 13% yield based on the prior dividend, which is a very high number in the current low interest rate environment. Over the years, we have paid more than $27 per share in dividends or $2.3 billion in total, and we have a significant and fixed rate charter backlog, supporting continued dividend capacity in the future. The total charter revenues of $157 million in the quarter was in line with the previous quarter, with more than 90% of this from vessels on long-term charters and less than 10% from vessels employed on short-term charters and in the spot market. The EBITDA equivalent cash flow in the quarter was approximately $117 million. And last 12 months, the EBITDA equivalent has been approximately $481 million, similar to the situation the last 12 months in the prior quarter. Excluding cash in the rig owning subsidiaries, the consolidated cash position at quarter end was more than $200 million, up from around $150 million at the end of the second quarter. In addition, we had $33 million in marketable securities at quarter end. And after quarter end, we have used some of the cash to take out the financing of the drilling rig West Taurus, but we still have a strong cash position with more than $100 million remaining. Our fixed rate backlog stands at approximately $3.2 billion after recent charter extensions and vessel sales, providing significant cash flow visibility going forward. Of this, $2.4 billion relates to shipping assets alone and excludes revenues from 16 vessels trading in the short-term market and also excludes future profit share optionality. The profit share contribution, which I mentioned, adds optionality value was around $6 million in the third quarter. We are very happy to see that it happened much quicker than anyone anticipated and both vessels are now trading out chartered out again on one on 100-day charter and one for 11 months. We have repurchased all the debt on the idle rig West Taurus at the discount essentially limited to the $83 million corporate guarantee, the cash in the rig owning subsidiary, which was already pledged to the banks anyway for some margin. The delivery took place yesterday and net cash to us is more than $10 million after repayment of the associated financing, and the proceeds are expected to be reinvested in new accretive transactions. Excluding the drilling rigs, which I will cover on the next page, the backlog from shipping assets was $2.4 billion at the end of the quarter. Over the years, we have changed both fleet composition and structure, and we now have 81 shipping assets in our portfolio and no vessels remaining from the initial fleet in 2004. And over time, the mix of the charter backlog has varied from 100% tankers to nearly 60% offshore at one stage to container market being the largest right now. In addition, we have 16 vessels traded in the short-term market, which we define as up to 12-month charters and also from time to time, as I mentioned earlier, significant contributions from profit shares on assets. All three rigs were employed on bareboat charters of Seadrill and generated approximately $24 million in charter hire in the third quarter. Net of interest and amortization, the contribution was approximately $8 million or around $0.07 per share. At that time, the loan balance on the rigs was much higher and we have reduced leverage by more than 50% in this three-year period as we illustrate on this slide. At the end of the second quarter, Seadrill reported a cash position of $1 billion, and while Seadrill did pay full charter hire in the third quarter, no charter hire has been received so far in the fourth quarter. From the start of the transaction with Seadrill all the way back from 2008, all the revenues from the subcharters of these assets, and in this instance, more importantly here now from the two drilling rigs that are working, the West Linus and West Hercules, the revenues from the subcharter have been paid into accounts pledged to SFL's rig owning entities and refinancing banks. The company generated gross charter hire of approximately $157 million in the third quarter, with more than 90% of the revenue coming from our fixed charter rate backlog, which currently stands at $3.2 billion. And while the current charter backlog relating to our offshore assets may be impacted by the pending Seadrill restructuring, the backlog from our shipping portfolio stands at a solid $2.4 billion, providing us a strong visibility on our cash flow going forward. At quarter end, SFL has a liner fleet of 48 container vessels and two car carriers. The liner fleet generated gross charter hire of approximately $80 million. Of this amount, approximately 98% was derived from our vessels on long-term charters. At quarter end, SFL's liner fleet backlog was approximately $1.8 billion, with an average remaining charter term for approximately four and a half years or approximately seven years if weighted by charter revenue. Approximately 84% of the liner backlog is the world's largest liner operators, Maersk Line and MSC, with a balance of approximately 16% to Evergreen. Our tanker fleet generated approximately $24 million in gross charter hire during the quarter, including $4.8 million in profit split contribution from our two VLCCs on charters to Frontline. The net contribution from the company's two Suezmax tankers was approximately $3.3 million in the third quarter, and the vessels are traded in the short-term market for the time being. After repayment of associated financing, the transaction increased SFL's cash balance by approximately $10.7 million. In the third quarter, our dry bulk fleet generated approximately $28.4 million in gross charter hire. Of this amount, approximately 70% was derived from our vessels on long-term charters. During the quarter, the company had 10 Handysize vessels employed in spot and short-term markets. The vessels generated approximately $7 million in net charter hire compared to $2.4 million in the previous quarter. All of our drilling rigs are long-term bareboat charters to fully guaranteed affiliates of Seadrill Limited and generated approximately $24.4 million in charter hire during the quarter. This summarizes to an adjusted EBITDA of approximately $170 million for the third quarter or $1.08 per share. So for the third quarter, we report total operating revenues according to U.S. GAAP, approximately $160 million, which is less than approximately $157 million of charter hire actually received for the reasons just mentioned. In the quarter, the company reported profit split income of $4.8 million from our tanker vessels on charter to Frontline and $800,000 from profit split arrangements related to fuel savings on some of our large container vessels. In the third quarter, the credit loss provisions increased by approximately $6.2 million, primarily in wholly owned nonconsolidated subsidiaries. Furthermore, the company recorded nonrecurring and noncash items, including negative mark-to-market effects relating to interest hedging, currency swaps and equity investments of $600,000 and amortization of deferred charges of $2.3 million. So overall, and according to U.S. GAAP, the company reported a net profit of $16 million or $0.15 per share. At quarter end, SFL had approximately $206 million of cash and cash equivalents, excluding $22 million of cash held in wholly owned nonconsolidated subsidiaries. Furthermore, the company had marketable securities of approximately $33 million, based on market prices at the end of the quarter. This included 1.4 million shares in Frontline, four million shares in ADS Crude Carriers and other investments in marketable securities, in connection with the sale of 3 older VLCCs to ADS Crude Carriers back in 2018 as well to shares in the company as part payment. When including the dividend received, the value is estimated approximately $12 million illustrating how SFL, from time to time, takes steps to maximize value for our shareholders. At quarter end SFL had five debt-free vessels with a combined charter value of approximately $40 million based on average broker appraisals. So based on Q3 2020 figures, the company had a book equity ratio of approximately 26%. Then to summarize, the Board has declared a cash dividend of $0.15 per share for the quarter. This represents a dividend yield of approximately 8% based on the closing share price yesterday. This is the 67th consecutive quarterly dividend, and since inception of the company in 2004, more than $27 per share or $2.3 billion in aggregate have been returned to shareholders through dividends. Despite a relatively volatile market in 2020, we have added more than $250 million per fixed charter rate backlog over the last 12 months. And while risk premiums on energy and shipping investments have increased with the recent volatility in financial markets, SFL has, at the same time, with new attractive financing, has expanded its group of lending banks, especially in the Far East to now represent more than 40% of our lending volume. SFL's business model has been continuously tested throughout its 16 years of existence and has previously been highly successful in navigating periods of volatility.

The announced dividend of $0.15 per share represents a dividend yield of around 8% based on closing price yesterday, and this is our 67th consecutive quarter with dividends. In light of the continued uncertainty surrounding Seadrill and outcome of their pending financial restructuring, the Board decided to adjust the dividend down to $0.15 and thereby effectively exclude all contribution from offshore rigs for the time being. So overall, and according to U.S. GAAP, the company reported a net profit of $16 million or $0.15 per share. Then to summarize, the Board has declared a cash dividend of $0.15 per share for the quarter.

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We achieved record revenue, 75.2% greater than last year, driven by organic growth of 11.9% and the remaining 62.3% of sales increase contributed by Teledyne FLIR. Revenue increased organically in every major business group but was especially strong in our commercial imaging and electronic test and measurement instrumentation businesses where organic growth for each was greater than 20% in the quarter. Furthermore, orders exceeded sales for the fourth consecutive quarter with the third quarter book-to-bill of 1.1 GAAP earnings per share of $2.81 increased 13.3% compared to last year, and was $0.03 less than our record GAAP third quarter earnings achieved in 2019. However, excluding acquisition-related charges, earnings were $4.34 per share in the third quarter, an increase of 61.9% on a comparable basis from 2020. Cash flow was a third quarter record allowing repayment of $300 million of debt while our leverage ratio declined to 3.3 from 3.7 at the end of the second quarter. We continue to accelerate the pace of plant synergies and currently expect to achieve our annualized cost saving target of $80 million before the middle of 2022 as opposed to the end of 2022 as we described in our July earnings call, and compared with 2024 as noted when we announced the transaction in January of 2021. On a full year basis, we now think a reasonable outlook for organic sales growth in 2021 is approximately 7% to 7.5%, led by forecasted growth of almost 13% in digital imaging, which excludes Teledyne FLIR. This translates to total sales of $4.59 billion with contribution of $2.4 billion from digital imaging, including FLIR. In our Digital Imaging segment, third quarter sales increased 217.3% largely due to the FLIR acquisition but organic growth in our combined commercial and government imaging businesses was also very strong at 17.9%. GAAP segment operating margin was 12.5%, but adjusted for transaction costs and purchase accounting segment margin was 23.9%. In our Instrumentation segment overall quarter sales increased 9% versus last year. Sales of test and electronic test and measurement systems, which includes oscilloscopes and protocol analyzers were exceptionally strong and increased 20.8% year-over-year to record levels. Sales of environmental instruments increased 7.6% from last year with sales related to human health and safety market such as drug discovery and gas and flame detection being strongest in the quarter. Sales of marine instrumentation increased 3.2% in the quarter. In addition, orders were the strongest in the last six quarters with a quarter book-to-bill of 1.13. Overall, Instrumentation segment operating profit increased 24.3% with segment operating margin increasing 270 basis points or 247 basis points, excluding intangible asset amortization. In the Aerospace and Defense Electronics segment, third quarter sales increased 11.7% driven by 8.4% growth in defense, space, and industrial sales combined with a 27% increase in sales of commercial aerospace products versus last year's pandemic-related tough quarter. GAAP operating profit increased 34.5% with margin 375 basis points greater than last year. Finally in the Engineered System segment, third quarter revenue increased 1.4% but operating profit and margin declined slightly since we exited the higher margin turbine engine business earlier this year. For several years, we've been on a journey to move our overall operating margin from the low-teens to over 20%. Over the last 2.5 years, we made tremendous progress with it -- with stand -- notwithstanding the pandemic and the recent supply chain and inflationary pressures. To date, the approximate $1 increase in our earnings outlook is primarily the result of further improvement in our full-year 2021 forecasted operating margin which excluding acquisition-related charges is 100 basis points better at approximately 21% from our 20% forecast in July. In the third quarter, cash flow from operating activities was $192.8 million including all acquisition-related costs. Excluding acquisition-related cash costs, net of tax, cash from operations was $194.9 million compared with cash flow of $150.3 million for the same period of 2020. Free cash flow that is cash from operating activities, less capital expenditures excluding acquisition-related costs was $165.7 million in the third quarter of 2021 compared with $135.1 million in 2020. Capital expenditures were $29.2 million in the third quarter compared to $15.2 million for the same period of 2020. Depreciation and amortization expense was $90.2 million for the third quarter of 2021 compared to $29.2 million in 2020. In addition, non-cash inventory step-up expense for the third quarter of 2021 was $35.2 million. We ended the quarter with approximately $3.89 billion of net debt that is approximately $4.44 billion of debt less cash of $551.8 million. Stock option compensation expense was $5.8 million for the third quarter of 2021 compared to $5.7 million for the same period of 2020. Resulting from the FLIR acquisition, restricted stock unit expense for FLIR employees was $1.8 million in the third quarter of 2021. Management currently believes that GAAP earnings per share in the fourth quarter of 2021 will be in the range of $2.53 to $2.69 per share, with non-GAAP earnings in the range of $4.07 to $4.17. And for the full year 2021, our GAAP earnings per share outlook is $9.13 to $9.29 and on a non-GAAP basis $16.35 to $16.45 compared with our prior outlook of $15.25 to $15.50. The 2021 full year estimated tax rate, excluding discrete items is expected to be 23.9%.

We achieved record revenue, 75.2% greater than last year, driven by organic growth of 11.9% and the remaining 62.3% of sales increase contributed by Teledyne FLIR. Furthermore, orders exceeded sales for the fourth consecutive quarter with the third quarter book-to-bill of 1.1 GAAP earnings per share of $2.81 increased 13.3% compared to last year, and was $0.03 less than our record GAAP third quarter earnings achieved in 2019. However, excluding acquisition-related charges, earnings were $4.34 per share in the third quarter, an increase of 61.9% on a comparable basis from 2020. Management currently believes that GAAP earnings per share in the fourth quarter of 2021 will be in the range of $2.53 to $2.69 per share, with non-GAAP earnings in the range of $4.07 to $4.17. And for the full year 2021, our GAAP earnings per share outlook is $9.13 to $9.29 and on a non-GAAP basis $16.35 to $16.45 compared with our prior outlook of $15.25 to $15.50.

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Recurring revenues and adjusted operating income both rose 8%. We now expect recurring revenue growth of 8% to 10% and adjusted earnings per share growth of 11% to 13%. The net result of all these points, our strong third quarter results, our continued internal and M&A investment and our outlook for fiscal 2021 is that Broadridge is executing well and is on track to deliver at the higher end of our 3-year financial objectives, including 8% to 12% adjusted earnings per share growth. Recurring revenues rose 11% to $586 million driven by revenue from new sales and very strong equity record growth. Over the past two years, we've created a shareholder communications hub, linking millions of investors across the EU and with hundreds of wealth managers, winning almost 300 new clients along the way. We are now on pace to serve almost 1,900 virtual shareholder meetings this proxy season, up from 1,400 last spring. The second factor driving ICS was very strong equity record growth, which was 20% for the quarter. It has also been broad-based across issuers with 20% growth across both widely held stocks and those with more medium-sized shareholder bases. Looking forward, we expect strong record growth to extend into the fourth quarter with our testing indicating 25% stock record growth for Q4. As we have with every chair and administration of both parties over the past 40 years, we look forward to assisting by investing in the next generation of technology, to help the SEC achieve its mandate to better inform and protect investors, all while reducing cost for registers and creating a fair return for our shareholders. Capital markets' recurring revenues slipped by 1% as steady international growth was offset as expected by lower license revenues. Itiviti adds more than $6 billion to Broadridge's total addressable market and will drive stronger growth, margins and earnings, as Edmund will discuss in his remarks. To date, 10 dealers and over 40 asset managers have joined the LTX platform. And an additional 14 institutions are signed in the onboarding process, including one of the world's largest fixed income managers. Let's turn next to our wealth and investment management business, where revenues grew by 7%, driven by new client additions and higher equity trading volumes. Today, after 12 long months, there remains significant challenges and thinking, in particular, of our more than 3,000 associates in India and of their families and friends. We started the fiscal year last July expecting 2% to 6% recurring revenue growth and 4% to 10% adjusted earnings per share growth. Fast forward nine months, and we are poised to deliver 8% to 10% recurring revenue growth, driven by a combination of strong new sales and healthy financial markets. Last but not least, we're on the brink of closing our $2.5 billion acquisition of Itiviti, expanding our capital markets franchise and further strengthening our global footprint. And yet even after those investments and the near-term dilution from Itiviti, we're positioned to deliver 11% to 13% adjusted earnings per share growth. We've asked a lot of our team over the past 12 months, and they're delivering. Recurring revenue grew 8% to $900 million. Adjusted operating income also grew 8% to $284 million. Margins declined 60 basis points to 20.4% as we successfully made the investments that we discussed last quarter in our technology platforms, in our products, our people. So our adjusted earnings per share grew to $1.76 in the quarter, up 5% over Q3 '20. As I said, recurring revenue grew 8% in the quarter, powered by 7% organic growth, and comfortably within our historic mid- to high single-digit growth performance. As a result of that strong organic growth and an increase in our outlook for the fourth quarter, we're raising our guidance for recurring revenue growth to 8% to 10% for the full year, up from our prior guidance of growth at the higher end of 3% to 6%. I'll start with our ICS segment, where revenues grew by 11% to $586 million. Regulatory revenues rose 20% to $290 million driven by the 20% equity record growth, higher mutual fund and ETF communications volumes and net new sales, including from our Shareholder Rights Directive II solution that Tim highlighted earlier. We expect strong regulatory revenue growth to continue in the fourth quarter with, our current testing indicating 25% equity record growth. After a strong 12 months, we now have significant penetration of our VSM solution across the S&P 500, and we expect issuer revenue growth to ease going forward as we start to lap the increase of VSM activity that began in Q4 '20. Wealth and investment management revenues rose 7%, driven by the onboarding of new component sales and higher retail trading. Capital markets revenues fell 1% of strong growth from international sales, was offset by $6 million in lower license revenues, which declined as expected. Let's turn to Page 10, where we show more detail on volume trends. Over the past decade, record growth across equity, mutual funds and ETF has grown 6% to 8%. Recently, equity record growth has accelerated to 11% in Q4 '20 and continued to increase through the year to 20% in Q3 '21, surpassing the estimates from our January testing. As I said, we expect these growth trends to continue and reach 25% in Q4 '21. Mutual fund and ETF record growth picked up as well to 7%, more in line with our historical growth rates. Organic growth at a very healthy 7% continues to be the largest component of our recurring revenue growth, and new sales remains the biggest driver with strong growth contribution from both ICS and GTO. We also continued our long track record of revenue retention above 97%. Total revenue growth this quarter was stronger than usual, reaching 11%, with distribution revenue contributing three points due to the increased mailings that correspond with the high record growth and the increased event-driven activity this quarter. Event-driven revenues have climbed over the past four quarters to be more in line with our historical norms of about $50 million a quarter and reached $74 million in the third quarter, well above last year's unusually low $39 million. For modeling purposes, we're assuming $50 million to $60 million of event-driven revenues in the fourth quarter. Adjusted operating income grew by 8%. Our adjusted operating income margin declined by 60 basis points, reflecting the continued investments that we're making in our technology platforms and product capabilities that we highlighted on our last quarterly call. These investments, which support our long-term growth, have a short-term impact on margin expansion, but we remain on track to deliver approximately 50 basis points of margin expansion for the full year, right in line with our fiscal year '21 guidance and 3-year growth objectives. Our $124 million closed sales year-to-date are in line with our performance over the same period last year. We remain on track to achieve our full year guidance of $190 million to $235 million for closed sales, which implies a fourth quarter range of $66 million to $111 million. And I'll also note that we continue to feel good about our recurring revenue backlog, which was 12% of our fiscal '20 recurring revenues as of Q4 '20 and gives us great visibility into our top line growth. We generated $136 million of free cash flow year-to-date, up $54 million over the first nine months of fiscal year '20 driven by higher earnings and strong working capital management. During the first nine months of the fiscal year, we invested $205 million in building out our industry platforms and another $71 million in capex and software spending. Our M&A investment through the first nine months of the year was 0, but that will change with our announced $2.5 billion acquisition of Itiviti, which I'll touch on in a moment. Given our strong free cash flow, we believe that we can comfortably achieve our new 2.5 times leverage target by the end of fiscal year '23. Turning to capital returns on the right-hand side of the slide, our dividend has grown and remains in line with our historical 45% payout ratio. We expect Itiviti to add $25 billion to $30 billion or one point to our full year recurring revenue growth, which equates to three points to our fourth quarter growth. In fiscal year '22, we expect Itiviti to add approximately $250 million or about eight points to our recurring revenue growth. And we expect the acquisition to be accretive by approximately two to three points or roughly $0.10 to $0.15 to adjusted earnings per share growth. Please note that Itiviti's results in both fiscal year '21 and fiscal year '22 will be negatively impacted by the accounting treatment of acquired revenue, which will reduce revenue recognition by approximately $30 million in total with 2/3 of that impact in fiscal '22. We expect Itiviti to add 2.5 to three points to our 3-year recurring revenue growth CAGR and, after interest, more than two points to our 3-year adjusted earnings per share CAGR. We are raising our outlook for fiscal '21 recurring revenue growth to 8% to 10% from the higher end of 3% to 6%, and that includes one point of growth from Itiviti. We are raising our guidance for total revenue growth to 8% to 10% from the higher end of 1% to 4%. We continue to expect our adjusted operating income margin to expand to approximately 18%, up from 17.5% in fiscal year '20 as we balance near-term returns with continued investments to sustain long-term growth. We expect adjusted earnings per share growth of 11% to 13%, up from the higher end of 6% to 10%, and that includes a 1-point drag from Itiviti. Finally, as I noted earlier, we continue to expect closed sales in the range of $190 million to $235 million. We are on track to deliver strong 8% to 10% recurring revenue growth. The end result is that we're on track to deliver at the higher end of our 3-year financial objectives of 7% to 9% recurring revenue growth and 8% to 12% adjusted earnings per share growth.

We now expect recurring revenue growth of 8% to 10% and adjusted earnings per share growth of 11% to 13%. Fast forward nine months, and we are poised to deliver 8% to 10% recurring revenue growth, driven by a combination of strong new sales and healthy financial markets. And yet even after those investments and the near-term dilution from Itiviti, we're positioned to deliver 11% to 13% adjusted earnings per share growth. So our adjusted earnings per share grew to $1.76 in the quarter, up 5% over Q3 '20. As a result of that strong organic growth and an increase in our outlook for the fourth quarter, we're raising our guidance for recurring revenue growth to 8% to 10% for the full year, up from our prior guidance of growth at the higher end of 3% to 6%. We are raising our outlook for fiscal '21 recurring revenue growth to 8% to 10% from the higher end of 3% to 6%, and that includes one point of growth from Itiviti. We are raising our guidance for total revenue growth to 8% to 10% from the higher end of 1% to 4%. We expect adjusted earnings per share growth of 11% to 13%, up from the higher end of 6% to 10%, and that includes a 1-point drag from Itiviti. We are on track to deliver strong 8% to 10% recurring revenue growth.

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Q1 was another strong quarter for NIKE with revenue growth of 16%. And even as we saw physical retail traffic return across much of the portfolio, digital continued its momentum with 25% currency-neutral growth led by North America at over 40%. Over the past 18 months, we've demonstrated our ability to manage through turbulence to emerge even stronger and better positioned. And moments like these are exciting for our company because sport energizes our roughly 75,000 employees around the world. If NIKE were a country, we would have eclipsed the competition, capturing 226 medals, including 85 golds. The film saw more than 800 million impressions across all channels as more than half of EMEA's Gen Z population viewed it at least once. Days later, we released Giannis' latest signature shoe, the Zoom Freak 3, which is built to support the dominant physicality that defines his style of play. So far this fall, we've seen sell-through in our kids business up almost 30%, led by digital with growth of almost 70. At over 750,000 square feet, this new home for our innovation teams is five times the size of our previous lab and is continued proof of NIKE's leadership in sports science. We're seeing strong over indexing growth of 16% in this key growth driver. So today, one year after that initial launch, there are more than 43 styles using Space Hippie innovations across four sports, three brands and our full consumer construct. For instance, you could see it come to life and iconic franchises such as the Air Force 1 Crater. Our digital growth is led by outsized member buying, which has seen a penetration increase of 14 points since last year. And we're seeing this come to life as repeat buying members grew more than 70% in the quarter. for example, 90% of the invitees for the Off-White Dunk went to members who have lost out on a prior Off-White collaboration over the past two years. This quarter our inline fleet grew over 70% in revenue approaching pre-pandemic levels. Our relentless focus on serving the consumer translated into revenue growth of 16% and EBIT growth of 22% versus the prior year. Sneakers has increasingly become an indicator and barometer of brand heat, now being operational at scale in 50 countries around the world. NIKE Digital is now 21% of total NIKE brand revenue, which is an increase of 2 points versus last year, with strong double-digit growth versus the prior year even with broad reopening of physical retail. Digital is increasingly becoming a part of everyone's shopping journey and we are well positioned to reach our vision of a 40% owned digital business by fiscal '25. This quarter, we exceeded our 65% full price sales realization goal, which reflects the expectations that we put forward at our last Investor Day. This quarter Express Lane grew roughly 20% versus the prior year and it increased its share of overall business. NIKE Inc revenue grew 16% and 12% on a currency neutral basis with growth across all marketplace channels. NIKE Digital grew 25% and NIKE owned stores grew 24%. Wholesale grew 5% in the quarter, negatively impacted by lower available inventory supply due to worsening transit times. Gross margin increased 170 basis points versus the prior year, driven primarily by higher NIKE Direct margins and partially offset by increased ocean freight surcharges. SG&A grew 20% versus the prior year. Our effective tax rate for the quarter was 11% compared to 11.5% for the same period last year. First quarter diluted earnings per share was $1.16, up 22% versus the prior year. In North America, Q1 revenue grew 15% and EBIT grew 10%. NIKE Direct grew more than 45% with NIKE Digital now representing 26% share of business. Digital continued its momentum and grew more than 40%, increasing market share by outperforming industry trends with strong growth in traffic and repeat buying member activity. The return to physical retail accelerated NIKE owned store growth of over 50% as we served members with elevated experiences. NIKE owned inventory increased 12% versus the prior year. In EMEA, Q1 revenue grew 8% on a currency neutral basis and EBIT grew 26% on a reported basis. NIKE Direct grew 10% on a currency neutral basis, led by our NIKE owned stores. In EMEA, while NIKE Digital grew 2% in the quarter, demand for full-priced products grew nearly 30% as we compared to higher liquidation levels in the prior year. NIKE owned inventory declined 14% on a reported basis with closeout inventory down double-digits. Transit times to EMEA have also deteriorated over the past 90 days, causing higher levels of in-transit inventory and negatively impacting product availability to serve strong consumer demand. In Greater China, Q1 revenue grew 1% on a currency neutral basis, EBIT grew 2% on a reported basis as the team delivered in line with our own recovery expectations. This campaign generated over $1 billion local views, demonstrating strong brand connection with Chinese consumers. NIKE Direct declined 3% on a currency neutral basis, partially impacted by retail closures. NIKE Digital declined 6% as we compare to higher liquidation in the prior year, partially offset by double-digit improvement in full price sales mix. We experienced a strong 6.18 consumer moment where we grew nearly 10% versus the prior year and remained the number one sports brand on Tmall. Demand in our SNKRS app grew more than 130% for the quarter. First quarter revenue grew 31% on a currency neutral basis and EBIT grew 72% on a reported basis. NIKE Digital grew more than 60% on a currency neutral basis, highlighted by the expansion of our NIKE app. in June, the app went live in Mexico and six additional countries across Southeast Asia generating 3 million local downloads during the quarter. This collaboration drove more than half of day 1 sales and highlights how digital and physical experiences are converging in our own stores, leveraging local insights and a more agile supply model. Therefore, we're revising our short-term financial outlook to incorporate the following factors: 10 weeks of production already lost in Vietnam since mid July. We still expect gross margin to expand 125 basis points versus the prior year, at the low end of our prior guidance, reflecting stronger than expected full price realization, the ongoing shift to our more profitable NIKE Direct business and price increases in the second half. This more than offsets roughly 100 basis points of additional transportation, logistics and airfreight costs to move inventory in this dynamic environment. We also expect a lower foreign exchange benefit now estimated to be a tailwind of roughly 60 basis points.

And even as we saw physical retail traffic return across much of the portfolio, digital continued its momentum with 25% currency-neutral growth led by North America at over 40%. NIKE Digital grew 25% and NIKE owned stores grew 24%. Gross margin increased 170 basis points versus the prior year, driven primarily by higher NIKE Direct margins and partially offset by increased ocean freight surcharges. First quarter diluted earnings per share was $1.16, up 22% versus the prior year. NIKE owned inventory increased 12% versus the prior year.

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Home prices are increasing at their fastest pace since the first quarter of 2006 and on a year-over-year basis the S&P Case-Shiller index reported 11.2% increase in home price appreciation. Interest rate on 10-year U.S. Treasuries rose 83 basis points this quarter, while short term interest rates remain near zero. The yield curve deepened over the period with a spread between two-year and 10-year treasury notes doubling to 158 basis points on market concerns of future inflation expectations. The BMO's high yield index ended the quarter tighter by 57 basis point while spreads AAA rated securitized reperforming loans tightened by an approximately 15 basis points. As part of our call optimization strategy, this quarter we exercise our call rights on six outstanding deals representing $4.1 billion of residential mortgage loans. In February, we issued $2.1 billion CIM 2021-R1 and $233 million CIM 2021-NR1. These securitizations created $1.9 billion of new securitized debt at a weighted average cost of 2.04%. The terminated debt had $1.7 billion outstanding with the previous cost of 5.2%, a savings of more than 300 basis points. In March, we issued $1.5 billion CIM 2021-R2 and $240 million CIM 2021-NR2. The March securitizations created $1.5 billion of new securitized debt, at a weighted average cost of 2.24%. The terminated debt had $1.2 billion outstanding, with a previous cost of 4.22%, a savings of about 200 basis points. The high advance rate on these four securitizations enabled us to release equity, locked in from the prior securitizations and lower our costs of securitized debt by 265 basis points. For the month of April we issued $860 million CIM 2021-R3 and $117 million CIM 2021-NR3. The April securitizations created $813 million of new debt at a weighted average cost of 2.12%. The terminated debt had $682 million outstanding, with a previous cost of 4.14%. a savings of 200 basis points. Securitized debt represents nearly 70% of Chimera's liabilities structure. At the end of March, Chimera paid off $4 million, 7% secured financing, and retired for cash the associated warrants on approximately 20 million shares. The cash cost on the warrants came at a 10% discount to the value of our common stock and then eliminated any future equity dilution on these shares. Our secured financing now stand at $4 billion down for $4.6 billion at quarter end. The weighted average rate on our secured financing at the end of March was 2.7%, down 70 basis points from 3.4% at year end. On the asset side of the balance sheet, this quarter Chimera purchase and securitized NR CIM 2021 J1 and J2 deals, a total of $884 million prime jumbo loans. Separately, through a series of transactions, we purchased $166 million high yielding business purpose loans. The weighted average coupon on these loans was 8.5% and has an expected portfolio yield of 7%. This quarter we sold $182 million Ginnie Mae project loans, generating $14 million in realized gains. In addition, seven Ginnie Mae project loans were called during the quarter totaling $146 million. Unlike traditional agency pass-throughs, Ginnie Mae project loans carry explicit call protection, and due to this feature we collected approximately $14 million in interest income through P-pay penalties. Through the end of April, we have re securitized $5.1 billion loans, lowered our cost of financing and freed up capital to help pay down higher cost debt. And over the remainder of 2021, we have eight additional deals with approximately $1.7 billion unpaid balance for potential resecuritizations. GAAP book value at the end of the first quarter was $11.44. GAAP net income for the first quarter was $139 million or $0.54 per share. net income for the first quarter was $87 million or $0.36 per share. Economic net interest income for the first quarter was $136 million. For the first quarter, the yield on average interest earning assets was 6.4%. Our average cost of funds was 3.3%. And our net interest spread was 3.1%. Total leverage for the first quarter was 3.6:1, while recourse leverage ended the quarter at 1.1:1. For the quarter, our economic net interest return on equity was 15%. And our GAAP return on average equity was 17%. Expenses for the first quarter, excluding servicing fees and transaction expenses were $18.6 million, up slightly from last quarter.

GAAP book value at the end of the first quarter was $11.44. GAAP net income for the first quarter was $139 million or $0.54 per share. net income for the first quarter was $87 million or $0.36 per share.

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As with many companies, our year-over-year comparisons are affected by the significant COVID impacts we experienced in 2020. Priced at $160, this product is delivering well against our expectations. Globally, our e-commerce business was up 69% in the first quarter, representing approximately 45% of our total direct-to-consumer business and included solid growth across all regions with better-than-expected conversion. Revenue was up 35% to $1.3 billion compared to the prior year. From a channel perspective, our wholesale revenue was up 35%. Our direct-to-consumer business increased 54%, led by a 69% growth in e-commerce and 44% growth in our owned and operated retail stores. Our licensing business was up 9%, driven primarily by North America. By product type, apparel revenue was up 35%, driven by our train and run categories. Footwear was up 47%, driven by our run and team sports categories. And the accessories business was up 73%, with most of the growth being driven by sports masks. From a regional and segment perspective, first-quarter revenue in North America was up 32%, driven by growth in our wholesale business, which was driven in part by Q4 to Q1 COVID-19-impacted order shifts. In EMEA, revenue was up 41%, driven by growth in wholesale, led by our distributor business, including the Q4 to Q1 COVID-19-impacted order shift as well as strength in e-commerce. Revenue in Asia Pacific was up 120%, with balanced growth across all channels, including our wholesale business, which partly benefited from Q4 to Q1 COVID-19-impacted order shifts. In Latin America, revenue was down 9%, driven primarily by lower wholesale results, partially offset by growth in e-commerce. First-quarter gross margin was significantly better-than-expected, with a 370 basis point improvement to 50%, driven by approximately 270 basis points of pricing improvements due to lower promotional activity within our DTC channel, along with lower promotions and markdowns within our wholesale business. In addition, we experienced 130 basis points of supply chain benefits, including improved inventory levels resulting in lower reserves and product costing improvements. And finally, we realized 50 basis points of favorable channel mix due to a lower mix of off-price sales and a higher mix of DTC. Offsetting these improvements was about 140 basis points of negative gross margin impact related to the absence of MyFitnessPal, a factor we expect to impact us throughout this year. SG&A expenses were down 7% to $515 million, primarily due to lower legal and marketing costs versus the prior year. Relative to our 2020 restructuring plan, we recorded $7 million of charges in the first quarter, an amount less than we had anticipated due to slower-than-expected execution. Including Q1, we've now realized $480 million of pre-tax restructuring and related charges. As detailed last September, this plan contemplates total charges ranging from $550 million to $600 million. We expect to incur approximately $35 million to $40 million of charges in the second quarter as we work toward completing this program in the second half of 2021. Moving on, our first-quarter operating income was $107 million. Excluding restructuring and impairment charges, adjusted operating income was $114 million. After tax, we realized net income of $78 million or $0.17 of diluted earnings per share during the quarter. Excluding restructuring charges and the noncash amortization of debt discount on our senior convertible notes, our adjusted net income was $75 million or $0.16 of adjusted diluted earnings per share. And finally, inventory at the end of the first quarter was down 9% to $852 million, a clear indicator of the improvements we have made to drive a more efficient operating model. And with that said, let's start at the top with revenue, which we expect to be up at a high-teen percentage rate for the full year. For gross margin, on a GAAP basis, we expect the full year rate to be up approximately 50 basis points against the 2020 adjusted gross margin of 48.6% with benefits from pricing and supply chain efficiency partially offset by the sale of MyFitnessPal, which carried a high gross margin rate. When combined, these marketing investments and planned higher incentive compensation represent about three-fourth of the increase in our year-over-year SG&A dollars, meaning without them the underlying SG&A is panned up slightly at about 2% to 3% in absolute dollars, which is consistent with the initial outlook we provided earlier this year. After these factors, we now expect operating income to reach approximately $105 million to $115 million this year or about $230 million to $240 million on an adjusted basis. Translated to rate, we expect to deliver an operating margin of approximately 2% for an adjusted operating margin of approximately 4.5% in 2021. All of this takes us to a diluted loss per share of approximately $0.02 to $0.04, or excluding restructuring impacts, about $0.28 to $0.30 of adjusted diluted earnings per share. For a little more color on the quarterly flow, we expect our second quarter revenue to be up approximately 70% as we lap last year's significantly shuttered retail world, with the highest regional growth seen in North America and Latin America. Next, we expect Q2 gross margin to be down about 120 to 140 basis points primarily due to the following negative impacts: channel mix, with e-commerce being a considerably lower portion of the overall business when compared to last year; and within the wholesale channel, we expect a higher percentage of off-price sales versus the last year's second quarter when off-price was predominantly closed. Bringing this to the bottom line, we expect second quarter adjusted operating income to be approximately $40 million to $45 million or about $0.04 to $0.06 of adjusted diluted earnings per share.

As with many companies, our year-over-year comparisons are affected by the significant COVID impacts we experienced in 2020. Revenue was up 35% to $1.3 billion compared to the prior year. From a regional and segment perspective, first-quarter revenue in North America was up 32%, driven by growth in our wholesale business, which was driven in part by Q4 to Q1 COVID-19-impacted order shifts. We expect to incur approximately $35 million to $40 million of charges in the second quarter as we work toward completing this program in the second half of 2021. After tax, we realized net income of $78 million or $0.17 of diluted earnings per share during the quarter. Excluding restructuring charges and the noncash amortization of debt discount on our senior convertible notes, our adjusted net income was $75 million or $0.16 of adjusted diluted earnings per share. And with that said, let's start at the top with revenue, which we expect to be up at a high-teen percentage rate for the full year. All of this takes us to a diluted loss per share of approximately $0.02 to $0.04, or excluding restructuring impacts, about $0.28 to $0.30 of adjusted diluted earnings per share.

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We're targeting up to $300 million of gross productivity savings by reducing variable costs and waste, while also increasing potato and asset utilization. Finally, we're targeting up to a 10% reduction in finished goods inventory, while continuing to target high service levels and case fill rates. May volumes for the category were 15% to 20% above pre-pandemic levels and our shipment of branded products were in line with those trends. As a result, we expect input cost inflation, especially for edible oils, packaging and transportation, to be a significant headwind for fiscal 2022. Second, as you may have seen last week, we announced an expansion of our facility in American Falls, Idaho, which will add about 350 million pounds of french fry capacity. The total investment of around $450 million over the next couple of years is for a new production line as well as to modernize the infrastructure at the facility. Specifically in the quarter, sales increased 19% to more than $1 billion, which is a company record for the fourth quarter and within about $10 million of our best quarter ever. Volume was up 13%, and price/mix up 6%. Excluding the benefit of the extra selling week last year, net sales increased 28% and volume was up 21%. The sales volume increase largely reflected the strong recovery in demand in the U.S., especially at full-service restaurants as well as improvement in some of our key international markets. For the year, net sales, exclude benefit of the 53rd week last year, was down 2%, with volume down 6% and price/mix up 4%. Gross profit in the fourth quarter increased $87 million, driven by higher sales and lower supply chain costs on a per pound basis. It also includes a $27 million year-over-year benefit from unrealized mark-to-market adjustments as well as the absence of a $14 million write-off of raw potatoes that we incurred last year. Canola oil prices, in particular, have nearly doubled in the last 12 months. Our SG&A increased $19 million in the quarter. And third, it includes an additional $3 million of advertising and promotional support behind the launch of new branded items in our Retail segment. Equity method earnings were $10 million. Excluding the impact of the unrealized mark-to-market adjustments, equity earnings increased $14 million versus the prior year. Diluted earnings per share in the fourth quarter was $0.44 compared to a loss of $0.01 in the prior year. For the year, adjusted diluted earnings per share was $2.16, down $0.34. Adjusted EBITDA, including joint ventures, was $166 million, which is up $88 million. For the year, adjusted EBITDA, including joint ventures, was $748 million down, $51 million. 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 up 19% in the quarter, with volume up 16% and price/mix up 3%. Excluding the extra selling week last year, sales increased 28% and volume was up 24%. The 3% increase in price/mix reflected the benefit of inflation-driven price escalators in our multiyear customer contracts as well as favorable customer mix. Global's product contribution margin, which is gross profit less A&P expense, increased 68% to $56 million. Sales for our Foodservice segment, which services North American foodservice distributors and restaurant chains generally outside the top 100 North American restaurant customers, increased 82% with volume up 64% and price/mix up 18%. Sales increased 94% and volume rose 74%, excluding the benefit of the extra selling week last year. Our shipments to noncommercial customers increased at a more modest rate and currently remain at about 2/3 of pre-pandemic levels. Overall, shipments by our Foodservice segment exited the quarter at around 95% of pre-pandemic volume. Foodservice's product contribution margin rose 127% to $96 million. Sales for our Retail segment declined 28%, with volume down 30% and price/mix up 2%. Excluding the extra sales week last year, sales declined 22% and volume declined 24%. We expected this decline as it was against a very strong fourth quarter of fiscal 2020, which included weekly retail sales for the category that were up around 50% on average as consumers switched consumption patterns due to government-imposed stay-at-home orders. Overall category sales are currently up about 25% from pre-pandemic levels, and each of our branded equities continued to outperform the category. The Retail segment's price/mix increased 2%, reflecting favorable mix benefit of our branded business. Retail's product contribution margin declined 32% to $21 million. Lower sales volumes and a $3 million increase in A&P expense to support the launch of new products drove the decline. In fiscal 2021, we generated more than $550 million of cash from operations, which is down about $20 million versus last year due to lower sales and earnings, partially offset by lower working capital. We spent $161 million in capex, paid $135 million in dividends and bought back nearly $26 million worth of stock at an average price of just over $78 per share. And at the end of our fiscal year, we had nearly $785 million of cash on hand, and our revolver was undrawn. Our total debt was more than $2.7 billion, and our net debt to EBITDA, including joint ventures ratio, was 2.6 times. In terms of my successor, I've known and worked with Bernadette for around 20 years on and off. And as Tom mentioned, we continue to expect overall U.S. french fry demand will return to pre-pandemic levels on a run rate basis around the end of calendar 2021, which is essentially the beginning of our fiscal third quarter. With respect to earnings, we expect adjusted EBITDA, including joint ventures and net income to gradually normalize as the year progresses, but it will be pressured during the first half by a step-up in input and transportation cost inflation as well as some residual effects of the pandemic's disruptive impact on our manufacturing and distribution operations. As you may recall, we generally hold about 60 days of finished goods inventory. In addition to our operating targets, we anticipate total interest expense of around $115 million. We estimate a full year effective tax rate of between 23% and 24% and expect total depreciation and amortization expense will be approximately $190 million. And finally, we expect capital expenditures of $650 million to $700 million depending on the timing of spending behind our large capital projects. So in sum, we expect net sales growth for the year will be above our long-term target of low to mid-single digits, with growth largely driven by volume in the front half and more of a balance of volume and price/mix in the back half.

As a result, we expect input cost inflation, especially for edible oils, packaging and transportation, to be a significant headwind for fiscal 2022. The sales volume increase largely reflected the strong recovery in demand in the U.S., especially at full-service restaurants as well as improvement in some of our key international markets. Diluted earnings per share in the fourth quarter was $0.44 compared to a loss of $0.01 in the prior year. And as Tom mentioned, we continue to expect overall U.S. french fry demand will return to pre-pandemic levels on a run rate basis around the end of calendar 2021, which is essentially the beginning of our fiscal third quarter. With respect to earnings, we expect adjusted EBITDA, including joint ventures and net income to gradually normalize as the year progresses, but it will be pressured during the first half by a step-up in input and transportation cost inflation as well as some residual effects of the pandemic's disruptive impact on our manufacturing and distribution operations. So in sum, we expect net sales growth for the year will be above our long-term target of low to mid-single digits, with growth largely driven by volume in the front half and more of a balance of volume and price/mix in the back half.

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Client engagement with our experts rose significantly, during Q3 client interactions increased more than 20% year-over-year to over 120,000 interaction. More than 15,000 executives attended and that's about double the number that attended Orlando Symposium in-person last year. Attendees were highly engaged and participated in an average of 11 live sessions. More than 80% of IT Symposium Americas attendees rated the conference as meeting or exceeding their expectations. We have eight more virtual conferences planned for 2020 and have -- already have more than 21,000 attendees registered. Third quarter revenue was $995 million, down 1% both as reported and FX neutral. Excluding conferences, our revenues were up 5% year-over-year FX neutral. In addition, contribution margin was 67%, up more than 300 basis points versus the prior year. EBITDA was $168 million, up 20% year-over-year and up 19% FX neutral. Adjusted earnings per share was $0.91 and free cash flow in the quarter was a very strong $229 million. Research revenue in the third quarter grew 6% year-over-year on a reported and FX neutral basis. Third quarter research contribution margin was 72%, benefiting in part from the temporary cost avoidance initiatives we put in place starting in the first quarter. Total contract value was $3.4 billion at September 30th, representing FX neutral growth of 5% versus the prior year. Global Technology Sales contract value at the end of the third quarter was $2.8 billion, up 5% versus the prior year. Client retention for GTS was 80%, down about 160 basis points year-over-year, but up modestly from last quarter. Wallet retention for GTS was 99% for the quarter, down about 600 basis points year-over-year. GTS new business declined 7% versus last year. We ended the third quarter with enterprises down about 3% from last year. It now stands at $227,000 per enterprise in GTS, up 9% year-over-year. At the end of the third quarter, the number of quota-bearing associates in GTS was down about 8% year-over-year. We expect to end 2020 with more than 3,100 quota-bearing associates, a slight decline from the end of 2019. For GTS, the year-over-year net contract value increase, or NCVI, divided by the beginning period quota-bearing headcount was $41,000 per salesperson, down about 60% versus the third quarter of last year. Despite the challenging macro environment, GTS CV grew in nearly all of our 10 largest countries similar to last quarter was up double digits in Brazil, Japan, France and the Netherlands. Global Business Sales contract value of $656 million at the end of the third quarter. That's about 20% of our total contract value. CV growth was 6% year-over-year as reported and 5% on an organic basis. All practices positively contributed to the 6% CV growth rate for GBS with the exception of marketing. GBS new business was strong, up 14% over last year. GxL is now more than 50% of GBS total contract value, an important milestone in the path to long-term sustained double-digit growth in GBS. Client retention for GBS was 82%, up 117 basis points year-over-year. Wallet retention for GBS was 99% for the quarter, up 220 basis points year-over-year. We ended the third quarter with GBS enterprises down about 9% from last year as we continue to see churn of legacy clients. The average contract value per enterprise continues to grow, it now stands at $140,000 per enterprise in GBS, up 16% year-over-year. At the end of the third quarter, the number of quota-bearing associates in GBS was down 7% year-over-year. For GBS, the year-over-year net contract value increase, or NCVI, divided by the beginning period quota-bearing headcount was $38,000 per salesperson, up from last year. Conferences revenue for the quarter was $30 million, a combination of the two virtual conferences and a number of virtual Evanta meetings. Third quarter consulting revenues decreased by 4% year-over-year to $89 million, on an FX neutral basis revenues declined 6%. Consulting contribution margin was 32% in the third quarter, up over 300 basis points versus the prior-year quarter. Labor-based revenues were $74 million, down 5% versus Q3 of last year or 6% on an FX neutral basis. Labor-based billable headcount of 737 was down 9%. Utilization was 60%, up about 300 basis points year-over-year. Backlog at September 30th was $96 million, down 12% year-over-year on an FX neutral basis. Our contract optimization business was down 3% on a reported basis versus the prior year quarter. This compares to a 74% growth rate in the third quarter last year. SG&A increased 2% year-over-year in the third quarter and 1% on an FX neutral basis. EBITDA for the third quarter was $168 million, up 20% year-over-year on a reported basis and up 19% FX neutral. Depreciation in the quarter was up approximately $2 million from last year, although, flat with the second quarter as a result of additional office space that had gone into service before the pandemic hit. Net interest expense, excluding deferred financing costs in the quarter, was $29 million, up from $22 million in the third quarter of 2019. The Q3 adjusted tax rate which we use for the calculation of adjusted net income was 20% for the quarter. The tax rate for the items used to adjusted net income was 26.4% in the quarter. Adjusted earnings per share in Q3 was $0.91. Operating cash flow for the quarter was $244 million compared to $220 million last year. Capex for the quarter was $15 million, down 59% year over year. Free cash flow for the quarter was $229 million, which is up 25% versus the prior year. This includes outflows of about $10 million of acquisition, integration and other non-recurring items. Free cash flow as a percent of revenue, or free cash flow margin was 15% on a rolling four-quarter basis, continuing the improvement we've been making over the past few years. Free cash flow as a percent of GAAP net income was about 285%. While we've seen timing benefits to our free cash flow margin from significantly lower capex and our ability to defer certain tax payments, even excluding these, LTM free cash flow margin is still up about 200 basis points versus the prior year. During the quarter, we took advantage of historically attractive high yield bond pricing and issued $800 million of new 10-year senior unsecured notes with a 3.75% coupon. We use the proceeds from this new issuance to extinguish our 2025 bonds, which carry a 0.625% coupon. The overall impact of the financing activities resulted in a 50 basis point reduction to total cost of borrowing. Our September 30th debt balance was $2 billion. Our reported gross debt to trailing 12 month EBITDA is about 2.5 times. Our total modified net debt covenant leverage ratio was 2.3 times at the end of the third quarter, well within the 5 times covenant limit. At the end of the third quarter, we had $554 million of cash. At the end of the quarter, we had about $1 billion of revolver capacity and have around $680 million remaining on our share repurchase authorization. We now forecast research revenue of at least $3.57 billion for the full year. This is growth of almost 6% versus 2019 and reflects a continuation of third quarter new business and retention trends. We now expect revenue of $110 million for the full year. We now forecast consulting revenue of at least $370 million for the full year or a decline of about 6%. Overall, we expect consolidated revenue of at least $4.05 billion, that's a reported decline of about 5% versus 2019. Excluding conferences, we expect revenue growth of at least 4.5% versus 2019 on a reported basis. We expect full year adjusted EBITDA of at least $740 million, that's full year margins of about 18.3%, up from the 16.1% margins we had in 2019. We expect our full year 2020 net interest expense to be $106 million. We continue to expect an adjusted tax rate of around 22% for 2020. We expect 2020 adjusted earnings per share of at least $4.07. For 2020, we expect free cash flow of at least $625 million.

Third quarter revenue was $995 million, down 1% both as reported and FX neutral. Adjusted earnings per share was $0.91 and free cash flow in the quarter was a very strong $229 million. Adjusted earnings per share in Q3 was $0.91. We now expect revenue of $110 million for the full year. We expect 2020 adjusted earnings per share of at least $4.07. For 2020, we expect free cash flow of at least $625 million.

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Our strong relationship and improved ability to serve the customers is reflected in our third quarter performance, in seven of our 10 largest categories we outperformed private label, a trend that we've seen over the last year. Third quarter revenue of $1.1 billion grew 5.3% versus last year. On an organic basis, revenue grew 1.7% and was driven by pricing of 3%. Third quarter adjusted EBITDA was $109 million. Adjusted EBITDA margin of 9.9% declined 320 basis points, driven by inflation, labor and supply chain disruption. We delivered adjusted diluted earnings per share in the third quarter of $0.46, within the range of our guidance that we communicated in August. Bill will get into this more, but we estimate that in the third quarter we had roughly $40 million in unmet demand due to constraints across the network, either not being able to run lines to the lack of labor or because we didn't have the appropriate supplies. We are a complex supply chain business with 29 categories and 40 plants as we are organized today. On Slide 8, you see that third quarter revenue was $1.1 billion, up 5.3% versus last year, of which 3 points was pricing related and we've been able to service a $40 million of revenue as Steve mentioned earlier, we would have delivered the top end of our revenue guidance in the quarter. On Slides 9 and 10, we have provided revenue by division and by channel. Meal prep net sales grew 7.4%, elevated by 5.2 points from the past the pasta acquisition. Organic sales were nearly 2%, of which 4.6 points was pricing. Volume and mix declined 2.8 points, driven by supply chain constraints and partially offset by the continued improvement in the food-away-from-home channel. Snacking & beverage revenue grew 2%, of which 1.1% was driven by volume and mix and in particular, new product introductions. Sild 10 details our topline by channel. The unmeasured retail channel, which includes key retailers in the value club and online space continue to drive growth of 6% this quarter. This compares to a decline of 2% in the measured channels, a sequential improvement over the second quarter. Volume and mix, including absorption were a negative $0.26 of impact. In the third quarter, pricing contributed $0.43, partially offsetting inflation we incurred in the first half of the year. In the third quarter, the higher input cost was a negative $0.88. Total PNOC or the net of these two is negative $0.45. Also in the third quarter operations contributed $0.22 in total versus last year. While the comparison to the prior year is positive, the COVID related disruption impacting labor and the supply chain cost the company by about $0.07 in the quarter. Across our 29 categories and 40 plants, we have been working hard to mitigate the impact. SG&A was a benefit of $0.16. Finally, interest expense favorability contributed $0.08 in the quarter versus last year. In the last 12 months, we paid down more than $300 million in debt, reducing total debt from $2.2 billion dollars to $1.9 billion. We've also reduced our weighted average cost of debt by 100 basis points with the refinancing completed earlier this year. This action lowered our annual interest cost by approximately $20 million. So between cash on hand and the revolver, we have strong liquidity of nearly $800 million. Financial leverage in the third quarter was 3.9 times as we build inventory to prepare and anticipate continued supply chain interruption. Similar to Q3, we anticipate we'll have some limitations on our ability to meet all demand indicated by our customer orders and we think revenue in 2021 will be in the $4.20 [Phonetic] to $4.325 billion. While we are exploring many avenues to mitigate the lack of labor availability and supply chain dynamics, in the near-term our cost of service to customer will be significantly higher as a result of these factors, we are reducing our EBIT guidance $155 million to $175 million, which compares to $230 million to $260 million previously. This translates into full year adjusted earnings per share of $1.08 to $1.28, down from our revised August guidance of $2 and $2.50 per share. We are reducing our 2021 free cash flow guidance to at least $100 million. Slide 14 covers our fourth quarter guidance and our expectation for adjusted earnings per share between $0.00 and $0.20. On Slide 15, we started with our February EBIT guidance of approximately $300 million because we believe that this is a much closer and normalized annual level of profitability for the company. We've talked in August about this impacting revenue in both the quarter and the year and we estimate this to be a $40 million impact to EBIT this year. Our original guidance contemplated input cost headwinds of approximately $100 million to $110 million. The additional inflationary headwind is another $125 million, more than double our original estimate. Our realized Q3 price increase of 3% is expected to accelerate to 4% to 5% in Q4, building to low-double digits in 2022. We estimate that the timing lag in calendar '21 is approximately $75 million. these challenges are especially acute across our 40 plant network. We estimate that the incremental cost this year is approximately $60 million. We've also captured the benefit of the reversal of the variable compensation accrual of $35 million. The net of these factors represent the near-term impact that has driven our 2020 EBIT guidance to $165 million at the midpoint.

Third quarter revenue of $1.1 billion grew 5.3% versus last year. We delivered adjusted diluted earnings per share in the third quarter of $0.46, within the range of our guidance that we communicated in August. Similar to Q3, we anticipate we'll have some limitations on our ability to meet all demand indicated by our customer orders and we think revenue in 2021 will be in the $4.20 [Phonetic] to $4.325 billion. This translates into full year adjusted earnings per share of $1.08 to $1.28, down from our revised August guidance of $2 and $2.50 per share.

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Genie Energy added 21,000 net RCEs and 22,000 net meters during the quarter. Inclusive of Orbit Energy, we ended the third quarter with the largest global customer base in our history, 442,000 RCEs and 558,000 meters. GRE added 7,000 net RCEs and 1,000 net meters during the quarter. GRE's gross domestic meter adds in the third quarter totaled 44,000, a 4,000 meter increase from the previous quarter but still a 32,000 meter decrease from the pre-COVID-19 level we achieved in the third quarter of last year. Monthly average churn fell to 3.7% from 3.9% last quarter and from 5.3% in the year ago quarter. We added 14,000 net RCEs and 21,000 net meters during the quarter. At September 30, our International book held 92,000 RCEs and 182,000 meters, contributing 1/5 of our global RCEs and 1/3 of our global meters. In the U.K., where we operate through our Orbit Energy joint venture, our meter and RCE counts both increased more than 70% compared to the third quarter a year ago and generated revenue at an annual rate of more than $50 million. In light of Orbit's rapid growth and promising potential, we bought out our JV partner's interest for $1.7 million last month. At Genie Oil and Gas, we were able to begin our testing at Afek Ness 10 drilling site in Israel's Golan Heights last week. Consolidated revenue increased in the third quarter of 2020 by 12% to $96 million. Revenue at Genie Retail Energy, or GRE, our domestic REP segment increased 10% to $89 million on a significant increase in average per meter electricity consumption that Michael mentioned. At Genie Retail Energy International, the segment that comprises our REP operations outside of the U.S., revenue increased 92% to $5.8 million on meter growth and higher average revenue per meter. Consolidated gross profit, predominantly generated by GRE, increased 4% to $27 million as the increase in kilowatt hour sold offset a decrease in gross profit per kilowatt hour sold. Gross margin decreased 240 basis points to 28.4% on the decrease in gross profit per kilowatt hour sold at GRE. Our consolidated SG&A spend decreased 3% to $19 million, as domestic restrictions on face-to-face customer acquisition programs during the pandemic slowed the pace of gross meter adds, which was only partially offset by higher spending on customer acquisition internationally. Equity and the net loss in equity method investees was $146,000 this quarter compared to $238,000 in the year ago quarter, reflecting our share of the results at Atid in Israel. As Michael mentioned, following quarter end, we acquired our partner's stake in the U.K. venture for $1.7 million. Consolidated income from operations increased 22% to $8.5 million, while adjusted EBITDA increased 19% to $9.5 million. At GRE, income from operations increased 14% to $12.3 million, and adjusted EBITDA increased 13% to $12.6 million. The loss from operations at Genie International was $1.6 million, and adjusted EBITDA loss came in at $1 million, both unchanged from levels in the year ago quarter. Consolidated earnings per diluted share increased to $0.24 from $0.18 in the year ago quarter. Cash, cash equivalents and restricted cash increased to $49 million at September 30, 2020, from $42 million at the close of the second quarter, while working capital increased to $55 million from $49 million.

Consolidated earnings per diluted share increased to $0.24 from $0.18 in the year ago quarter.

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Adjusted results exclude special items that affect comparisons with reported results. Finally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment, refer to existing adult tobacco consumers 21 years of age or older. oral nicotine pouches as we recently closed transactions to acquire the remaining 20% global interest. Tom served 13 distinguished years on our board, offered valuable insights and guidance during his tenure, and was a true visionary. Our first-quarter adjusted diluted earnings per share declined 1.8%, primarily driven by unfavorable timing of interest expense and a higher adjusted income tax rate. For volumes, reported smokeable segment domestic cigarette volume declined 12% in the first quarter, reflecting year-over-year trade inventory movements, one fewer shipping day and other factors. When adjusted for these factors, cigarette volume declined by an estimated 3.5%. We believe that in the first quarter of 2020, wholesalers built inventories by approximately 900 million units, driven in part by COVID-19 dynamics, compared with a depletion of approximately 300 million units in the first quarter of 2021. At the industry level, we estimate that first-quarter adjusted domestic cigarette volume declined 2%. We completed transactions in December and April to acquire the remaining 20% of the global on! business for approximately $250 million. When we made the initial 80% acquisition in 2019, the oral nicotine pouch category in the U.S. was rapidly growing off of a small base. In the first quarter of 2021, we estimate that retail share for all nicotine pouches was approximately 13% of the total oral tobacco category, double its share in the year ago period. We expect continued growth from the oral nicotine pouch products and estimate that category volume in the U.S. will grow at a compounded annual growth rate of approximately 25% over the next five years. Helix achieved an annualized manufacturing capacity of 50 million cans by the end of last year, and as of the end of the first quarter, on! was sold in approximately 93,000 stores. share of the total oral tobacco category grew significantly to 1.7%. retail share was 3.1%, an increase of seven-tenth from the 2020 full-year share. share of the total U.S. oral tobacco category as Helix expects to be in stores covering 90% of the industry's oral tobacco volume by midyear. We estimate that total category volume increased 24% versus the year ago period. Sequentially, we estimate that the category volume increased 7% as competitive marketplace activity continued. As a result of these dynamics, JUUL's first-quarter retail share of the total e-vapor category decreased to 33%. In Atlanta stores with distribution, Marlboro HeatSticks retail share of the cigarette category was 1.1%, an increase of two-tenth sequentially and in Charlotte, HeatSticks retail share was 1%, an increase of three-tenth sequentially. Last month, PM USA began selling the IQOS 3 device, which offers a longer battery life and faster recharging, as compared to the 2.4 version. We're encouraged to see that many consumers are upgrading their 2.4 devices, representing approximately 25% of all IQOS 3 device sales in the first quarter. Along with geographic expansion, PM USA is increasing the use of its digital platforms like Marlboro.com and getiqos.com to engage with smokers and communicate the benefits of IQOS, including the MRTP claim on the IQOS 2.4 system. We reaffirm our 2021 guidance to deliver adjusted diluted earnings per share in a range of $4.49 to $4.62. This range represents an adjusted diluted earnings per share growth rate of 3% to 6% from a $4.36 base in 2020. The smokeable products segment delivered over $2.3 billion in adjusted OCI and expanded adjusted OCI margins by 2.2 percentage points to 57.5%. PM USA's revenue growth management framework supported the segment's strong net price realization of 8% for the quarter. In the first quarter, Marlboro's retail share was 43.1%, an increase of four-tenth versus prior year. In the first quarter, Marlboro's price gap to the lowest effective price cigarette increased to 37%, primarily driven by heavy competitive promotional activity in the branded discount segment. The total discount segment retail share was 25.3%, an increase of one-tenth versus the year ago period. Middleton's reported cigar shipment volume increased over 11% in the first quarter. Oral tobacco products segment, adjusted OCI grew by 3.1%, and adjusted OCI margins declined by 0.9 percentage points to 72.1%. Total reported Oral Tobacco Products segment volume increased 0.6%, driven by on! When adjusted for trade inventory movements, calendar differences and other factors, segment volume increased by an estimated 0.5%. First-quarter retail share for the oral tobacco products segment was 48.1%, down 2.3 percentage points due to the continued growth of oral nicotine pouches. Michelle's first-quarter adjusted OCI increased approximately 46% to $19 million, driven primarily by higher pricing and lower costs. And in beer, we recorded $190 million of adjusted equity earnings in the first quarter, which was unchanged from the year-ago period and represents Altria's share of API fourth-quarter 2020 results. We recorded an adjusted loss of $27 million representing Altria's share of Cronos' fourth-quarter 2020 results. And finally, on capital allocation, we paid approximately $1.6 billion in dividends and repurchased approximately 6.9 million shares, totaling $325 million in the first quarter. We have approximately $1.7 billion remaining under the currently authorized $2 billion share buyback program, which we expect to complete by June 30, 2022. Our balance sheet remains strong and as of the end of the first quarter, our debt-to-EBITDA ratio was 2.5 times. We issued new long-term notes totaling $5.5 billion and repurchased over $5 billion in outstanding long-term notes. In May, we expect to retire $1.5 billion of notes coming due with available cash.

Adjusted results exclude special items that affect comparisons with reported results. oral nicotine pouches as we recently closed transactions to acquire the remaining 20% global interest. We completed transactions in December and April to acquire the remaining 20% of the global on! We reaffirm our 2021 guidance to deliver adjusted diluted earnings per share in a range of $4.49 to $4.62. This range represents an adjusted diluted earnings per share growth rate of 3% to 6% from a $4.36 base in 2020. In May, we expect to retire $1.5 billion of notes coming due with available cash.

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We expect to grow earnings per share 6.5% per year through at least 2025 supported by a $32 billion five-year growth capital plan. As outlined on our fourth-quarter call in February, over 80% of that capital investment is emissions reduction enabling and over 70% is rider recovery eligible. We offer a nearly 3.5% yield and expect dividends per share to grow 6% per year based on a target payout ratio of 65%. Taken together, Dominion Energy offers an approximately 10% total return premised on a pure-play, state-regulated utility profile, operating in premier regions of the country. Our second-quarter 2021 operating earnings, as shown on Slide 4, were $0.76 per share, which included $0.01 hurt from worse than normal weather in our utility service territories. Both actual results and weather-normalized results of $0.77 were above the midpoint of our quarterly guidance range. So this is our 22nd consecutive quarter, so 5.5 years now, of delivering weather-normal quarterly results that meet or exceed the midpoint of our quarterly guidance range. Second-quarter GAAP earnings were $0.33 per share and reflect the mark-to-market impact of economic hedging activities, unrealized changes in the value of our nuclear decommissioning trust funds, the contribution from Questar pipeline, which will continue to be accounted for as discontinued operations until divested and other adjustments. A summary of all adjustments between operating and reported results is, as usual, included in Schedule 2 of our earnings-release kit. For the third quarter of 2021, we expect operating earnings to be between $0.95 and $1.10 per share. For the first half of the year, weather-normal operating earnings per share of $1.86 represents approximately half of our full-year guidance midpoint. In Virginia, weather-normalized sales increased 1.2% year over year in the second quarter and 3.2% in South Carolina. And looking ahead, we expect electric sales growth in our Virginia and South Carolina service territories to continue to a run rate of 1% to 1.5% per year, so similar to what we were observing pre pandemic. Despite these cost pressures, as it relates to offshore wind, in particular, we remain confident in our ability to deliver that project in line with our previously guided levelized cost of energy range of $80 to $90 per megawatt hour. Third, its termination has no impact on the sale of the gas transmission storage assets to Berkshire, which we successfully completed back in November of last year and which represented approximately 80% of the originally announced transaction value. In June, we announced the successful syndication of sustainability-linked credit facilities totaling $6.9 billion, and we very much appreciate the efforts and support of all the banks who work with us on what we view as a very interesting new type of financing. The $6 billion master credit facility links pricing to achievement of annual renewable electric generation and diversity and inclusion milestones. And the $900 million supplemental facility presents a first-of-its-kind structure where pricing benefits accrue for draws related to qualified environmental and social spending programs. As described in the report, which is available on our website, we have modeled several potential pathways to achieve net zero emissions across our electric and gas business that reflect 1.5-degree scenario and are consistent with the Paris Agreement on climate change. The climate report shows we are a leader in both greenhouse gas emission reductions over the last 15 years and in our commitment to transparent progress toward our goal of net zero emissions. Our safety performance matters immensely to our more than 17,000 employees, to their families and to the communities we serve, which is why it matters so much to us and why it's our first core value. We were pleased that CNBC's list of America's Top States for Business ranked Virginia, North Carolina and Utah as 1, 2 and 3, respectively, a podium sweep for three of our five primary jurisdictions with a fourth major service territory, Ohio, also ranking in the top 10. 1 ranking for Virginia. At Gas Distribution, our colleagues have collaborated across our national footprint to share best practices, resulting in a nearly 20% reduction of third-party excavation damage to our underground infrastructure as compared to 2019. At Dominion Energy South Carolina, our ability to work in close partnership with state and local officials, combined with our commitment to meet an aggressive time line for electric and gas service delivery, were key to attracting a new $400 million brewery to the state last year. The facility is expected to create 300 local jobs and is one of the largest breweries built in the United States in the last 25 years. The 2.6 gigawatt Coastal Virginia offshore wind project received its notice of intent, or NOI, from the Bureau of Ocean Energy Management in early July, consistent with the time line we had previously communicated. Second, at the direction of the general assembly, we've provided over $200 million of customer arrears forgiveness to assist families and businesses in overcoming financial difficulties caused by the pandemic. Third, we've invested over $300 million in CCRO-eligible projects, including our offshore wind test project, which is the first operational wind turbines built in federal waters in the United States. We've now surpassed 1,000 megawatts of Dominion Energy-owned solar generation in service in Virginia, and there is a lot more to come. In fact, our pipeline of company-owned solar projects in Virginia under various stages of development currently totals nearly 4,000 megawatts, which gives us great confidence in our ability to achieve the solar capacity targets set forth in Virginia law and which support our long-term growth capital plans. In the very near term, about 25 days to be specific, we'll make our next and largest to date clean energy submission. We expect the filing to include as many as 1,100 megawatts of utility-owned and PPA solar, roughly consistent with the 65-35 split identified in the Virginia Clean Economy Act. It will also include around 100 megawatts of battery storage, including 70 megawatts of utility-owned projects. Taken together, the filing will represent as much as $1.5 billion of utility-owned and rider-eligible investment, further derisking our growth capital guidance provided on our fourth-quarter 2020 earnings call. Next, we received authorization from the Nuclear Regulatory Commission to extend the life of our two nuclear units at the Surry power station for an additional 20 years. These units currently provide around 45% of the state's zero carbon generation and under this authorization will be upgraded to continue providing significant environmental and economic benefits for many years to come. Our first phase covering 2019 through 2021 is well underway, and we recently filed our phase 2 plan with Virginia regulators covering the years 2022 and '23. The second phase includes approximately $669 million in capital investment, which is needed to facilitate and optimize the integration of distributed energy resources while continuing to address the reality that reliability and security are vital to our company and its customers. For around $5 per month on a typical residential bill, customers that opt into the program will offset the carbon impact of their gas distribution use. As a result, we expect to grow our dairy RNG portfolio from six projects in five states to 22 projects in seven states through the second half of the decade and enhance our development pipeline with specific projects toward our aspirational goal of investing up to $2 billion by 2035. Our current pipeline of projects will result in an estimated annual reduction of 5.5 million metric tons of CO2e, which is the equivalent to removing 1.2 million cars from the road. First, Senior Vice President, Craig Wagstaff, who's provided over 10 years of exemplary leadership for our gas utility operations in Utah, Idaho and Wyoming, will be retiring early next year. in 1984, and we have benefited greatly from his contributions since the Dominion Energy-Questar merger in 2016. We affirmed our existing annual and long-term earnings guidance and our dividend-growth guidance.

Our second-quarter 2021 operating earnings, as shown on Slide 4, were $0.76 per share, which included $0.01 hurt from worse than normal weather in our utility service territories. Second-quarter GAAP earnings were $0.33 per share and reflect the mark-to-market impact of economic hedging activities, unrealized changes in the value of our nuclear decommissioning trust funds, the contribution from Questar pipeline, which will continue to be accounted for as discontinued operations until divested and other adjustments. For the third quarter of 2021, we expect operating earnings to be between $0.95 and $1.10 per share. We affirmed our existing annual and long-term earnings guidance and our dividend-growth guidance.

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In the third quarter, sales increased to 11%, our fifth consecutive quarter of double-digit top line growth. This was against a strong 16% comp from last year. Operating margin for the quarter was 17.5% as we executed our planned transition to a more normalized level of SG&A expense to support our brands, innovation and new products. Sales increased 15% excluding currency, led by exceptional growth in North America and international faucets and showers and our spa business. We plan to invest approximately $100 million in this project over the next three years. And our Decorative Architectural segment sales grew 4% against a robust 19% comp from the third quarter of 2020. Propane had an exceptional growth of over 45% in the quarter, helping to offset moderating demand in DIY paint. DIY paint declined mid single-digits against a tremendous comp of over 25% in the third quarter of 2020. When compared to our third quarter 2019 sales, our DIY paint sales were up over 20%, a clear indication of a reengaged homeowner and strong home improvement fundamentals. We continued our share buyback activity during the quarter by repurchasing 2.2 million shares for $128 million. In addition, we anticipate deploying approximately $150 million in the fourth quarter, bringing our total share repurchases to over $1 billion for the year. Because of this outstanding execution and continued strong demand for our products, we are maintaining the midpoint of our previous guide and expect to achieve earnings -- full-year earnings per share in the range of $3.67 to $3.73. Sales increased to 11% against an impressive 16% comp in the third quarter of last year. Net acquisitions contributed 2% growth and currency had a minimal impact. In local currency, North American sales increased 9% or 6% excluding acquisitions. In local currency, international sales increased a robust 15% or 18% excluding acquisitions and divestitures against the healthy 9% comp. Gross margin of 34.2% is impacted by higher commodity and logistics cost in the quarter. SG&A as a percentage of sales was 16.7%. Operating profit in the third quarter was $385 million, with an operating margin of 17.5%, our earnings per share was $0.99. Plumbing growth continued to be strong with sales up 16% against the 13% comp in the third quarter of last year. Net acquisitions contributed 2% to its growth and currency contributed another 1%. North American sales increased 16% or 10%, excluding acquisitions. International plumbing sales increased 15% in local currency or 18%, excluding net acquisitions. Segment operating profit in the third quarter was $248 million and operating margin was 18.7%. For full-year 2021, we continue to expect Plumbing segment sales growth to be in 22% to 24% and operating margins of approximately 18.5%. Decorative Architectural sales increased 4% for the third quarter and 3% excluding acquisitions. Our DIY paint business declined mid single-digits in the quarter against more than 25% comp in the third quarter of last year. When comparing to Q3 2019, our third quarter DIY sales are up over 20%. Our propane business delivered exceptional growth of more than 45% in the quarter, as paint contractors are applying top rated Behr paint to more commercial and residential projects. When comparing to Q3 2019, our third quarter PRO sales are up over 35%. Segment operating margin in the third quarter was 19% and operating profit was $166 million. For full-year 2021, we continue to expect Decorative Architectural sales growth will be in the range of 2% to 5%, and operating margin to be approximately 19%. Our balance sheet is strong with net debt-to-EBITDA at 1.3 times. We ended the quarter with approximately $1.9 billion of balance sheet liquidity, which includes full availability of our $1 billion revolver. Working capital as a percent of sales, including our recent acquisitions, was 17%. Finally, we repurchased more than 15.2 million shares in 2021 for $878 [Phonetic] million. This is approximately 6% of our outstanding share count at the beginning of the year. We expect to deploy approximately $150 million for share repurchases or acquisitions in the fourth quarter as we continue to aggressively return capital to shareholders. We continue to anticipate overall sales growth of 14% to $16, and operating margin of approximately 17.5%. Lastly, we are maintaining our 2021 earnings per share estimate midpoint, but narrowing the range to $3.67 to $3.73 growth at the midpoint of the range. This assumes the 252 million average diluted share count for the year. When you compare our third quarter performance to Q3 2019, revenue is 28% higher, operating profit is 29% higher, operating margin is 10 basis points higher and adjusted earnings per share is an outstanding 62% higher.

Because of this outstanding execution and continued strong demand for our products, we are maintaining the midpoint of our previous guide and expect to achieve earnings -- full-year earnings per share in the range of $3.67 to $3.73. Sales increased to 11% against an impressive 16% comp in the third quarter of last year. Operating profit in the third quarter was $385 million, with an operating margin of 17.5%, our earnings per share was $0.99. Lastly, we are maintaining our 2021 earnings per share estimate midpoint, but narrowing the range to $3.67 to $3.73 growth at the midpoint of the range.

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Local currency growth was 18%, and we had strong broad-based growth in all regions. With the excellent sales growth, combined with good cost control and benefit of our margin and productivity initiatives, we achieved a 64% growth in adjusted EPS. Cash flow generation was also impressive as we achieved an almost 200% increase in our free cash flow generation. Sales were $804.4 million in the quarter, an increase of 18% in local currency. On a U.S. dollar basis, sales increased 24% as currency benefited sales growth by 6% in the quarter. Local currency sales increased 14% in both the Americas and Europe and increased 29% in Asia/Rest of the World. Local currency sales increased 44% in China in the first quarter. In the quarter, Laboratory sales increased 20%, Industrial increased 17%, with Core Industrial up 26% and product inspection up 5%. Food Retail increased 13% in the quarter. We estimate that we benefited approximately 2% from COVID tailwinds in the quarter, mainly related to our pipette business for COVID testing. Gross margin in the quarter was 58.6%, a 90 basis point increase over the prior year level of 57.7%. R&D amounted to $39.3 million, which represents a 7% increase in local currency. SG&A amounted to $221.8 million, a 7% increase in local currency over the prior year. Adjusted operating profit amounted to $210.7 million in the quarter, a 49% increase over the prior year amount of $141.3 million. Adjusted operating margins increased 440 basis points in the quarter to 26.2%. Currency benefited operating profit growth by approximately 6%, but had very little impact on operating margins. Amortization amounted to $13.9 million in the quarter, interest expense was $9.5 million in the quarter. Other income in the quarter amounted to $2.1 million, primarily reflecting nonservice-related pension income. Offsetting this was $2.8 million in acquisition costs that is excluded from adjusted EPS. Our effective tax rate before discrete items and adjusted for the timing of stock option deductions was 19.5% as compared to 21.5% in the first quarter of last year. Fully diluted shares amounted to $23.7 million in the quarter, which is a 3% decline from the prior year. Adjusted earnings per share for the quarter was $6.56, a 64% increase over the prior year amount of $4. Currency benefited adjusted earnings per share growth by approximately 7% in the quarter. On a reported basis in the quarter, earnings per share was $6.32 as compared to $4.03 in the prior year. Reported earnings per share in the quarter includes $0.12 of purchased intangible amortization, $0.10 of cost related to the PendoTECH acquisition, $0.04 of restructuring and a $0.02 benefit due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises. In the quarter, adjusted free cash flow amounted to $139 million, which is an increase of 196% on a per share basis as compared to the prior year. DSO declined by approximately 6.5 days to 40 days as compared to the prior year. ITO came in at 4.4 times, similar to last year. We paid $185 million upfront, and there is a $20 million potential earnout as well as some post-closing amounts. We expect PendoTECH to contribute approximately 1% to sales growth beginning in Q2. For the full year 2021, primarily due to the benefit of our Q1 results and with a strong outlook for Q2, we now expect local currency sales growth for the full year will be in the range of 10% to 12%. This compares to previous guidance range of 5% to 7%. We expect full year adjusted earnings per share guidance to be in the range of $31.45 to $31.90, which is a growth rate of 22% to 24%. This compares to our previous guidance of adjusted earnings per share in the range of $29.20 to $29.80. With respect to the second quarter, we would expect local currency sales growth to be in the range of 19% to 21% and expect adjusted earnings per share to be in a range of $7.50 to $7.65, a growth rate of 42% to 45%. As mentioned, we expect PendoTECH to contribute 1% to sales growth for the remaining quarters of the year. We expect reported amortization will amount to $62 million, which is higher than previously communicated due to the PendoTECH acquisition. The purchased intangible adjustment for earnings per share will increase to $0.66 for 2021. Other income, which is below operating profit, will approximately -- will approximate $2 million per quarter for the remainder of 2021. We expect our effective tax rate in 2021 to remain at 19.5%. In terms of free cash flow for the full year, we now expect it to be approximately $735 million. We expect to repurchase 637 million shares in 2021 for the remaining three quarters of 2021. We would expect to end 2021 in our targeted net debt-to-EBITDA range of approximately a 1.5 times leverage ratio. With respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3.5% in 2021 and 6% in the second quarter. In terms of adjusted EPS, currency will benefit growth by approximately 7.5% in the second quarter and 4% for the full year 2021. In terms of our Industrial business, Core Industrial did very well in the quarter with a 26% increase in sales driven by China, which had growth in Core Industrial in excess of 60%. Product inspection came in pretty much as we expected with a 5% local currency sales growth in the quarter. Food retailing came in better than expected with 13% growth because of better market demand in Europe and Asia and the rest of the world. Sales in Europe increased 14% in the quarter, with excellent growth in Lab, Core Industrial and Food Retail. Americas also increased 14% in the quarter with excellent growth in Lab and Core Industrial, offset by flat results in Product Inspection and a decline in Food Retail. Finally, Asia and the Rest of the World grew 29% in the quarter with very strong growth in most product lines. As you heard from Shawn, China had outstanding growth of 44% in the quarter with excellent growth across most product lines. Service and Consumables performed well and were up 11% in the quarter. About 50% of the Process Analytics business is to the pharma and biopharma market, with an emphasis on sensors to monitor PH, dissolved oxygen, carbon dioxide and other parameters.

Adjusted earnings per share for the quarter was $6.56, a 64% increase over the prior year amount of $4. On a reported basis in the quarter, earnings per share was $6.32 as compared to $4.03 in the prior year. For the full year 2021, primarily due to the benefit of our Q1 results and with a strong outlook for Q2, we now expect local currency sales growth for the full year will be in the range of 10% to 12%. We expect full year adjusted earnings per share guidance to be in the range of $31.45 to $31.90, which is a growth rate of 22% to 24%. With respect to the second quarter, we would expect local currency sales growth to be in the range of 19% to 21% and expect adjusted earnings per share to be in a range of $7.50 to $7.65, a growth rate of 42% to 45%.

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We're having a technical difficulty on our end, and we'll be extending the call by 15 minutes to be sure that we make up for any of the lost time. Total net revenue was $712 million, up 90% year over year, and adjusted EBITDA was $14 million, up $27 million. Turning to Topgolf, for the quarter, both walk-in traffic and event sales surpassed our expectations, driving same venue sales to an impressive increase of 6% over 2019 levels. For the full year, same venue sales were approximately 95% of 2019 levels, meaningfully higher than projected and an encouraging and very strong result given the operating environment. New venue openings continued on pace with our 72 Bay Fort Myers, Florida location opening strongly in mid-November. I've had a ringside seat watching Topgolf open venues for nearly 10 years now. For 2022, we are confident in our ability to deliver at least 10 new venues with the potential of adding an 11th in very late Q4. During [Audio gap] we installed over 1,700 new bays, bringing our total for the year to just under 7,000 new bay installations. We remain encouraged by continued strong demand and expect to install 8,000 bays or more in 2022. According to the National Golf Foundation's annual report, the number of on-course golfers increased by approximately 300,000 in 2021 to 25.1 million players, marking the fourth straight year of increased participation in traditional golf. Off-course participation also continued to grow, with 24.8 million people visiting nontraditional venues such as Topgolf and 5-Iron and approximately half of those playing exclusively off course. 1 driver on tour in its first week on tour at the tournament of Champions, and Callaway receiving more gold metals than any other manufacturer in Golf Digest's Recent Hot list. In our Apparel and Gear segment, revenue was up 33% year over year in Q4, led by a 40% increase in Apparel and a 19% increase in Gear. TravisMathew continued to grow at a roaring pace, with our own retail comp store sales up over 67% versus 2020. E-commerce sales were also up a healthy 30% versus 2020. The event was very successful with TravisMathew contributing over $1 million in donations to this very worthy cost. Both additions performed very well with the women's product selling out predominantly in the first 48 hours, and jackets and pants accounting for 37% of direct-to-consumer sales. In place of Black Friday and Cyber Monday sales discounts, the brand decided to donate 2 euros from every purchase made during the week to Peter Rowland's Forest Academy. 1 share in the wholesale channel during the quarter and direct-to-consumer efforts paid off with strong sales in our owned retail stores as foot traffic in the region increased. Looking ahead to 2022 and the consolidated company, we believe revenue will increase approximately 21%, and we expect adjusted EBITDA will be between $490 million and $515 million. As shown on Slides 10 and 11, consolidated net revenue for the full year 2021 was $3.1 billion, a 97% increase, compared to full year 2020 revenue of $1.6 billion. Full year 2021 adjusted EBITDA was $445 million, an increase of 170% over full year 2020 adjusted EBITDA of $165 million. When you look at a breakdown of our 2021 revenue, Golf Equipment represented 39% of total revenue. Topgolf was 35%, and Apparel, Gear, and Other represented 26%. For the fourth quarter, consolidated net revenue was $712 million, an increase of 90% compared to Q4 2020. Topgolf was the largest contributor by segment, generating $336 million. Our strong social events, strengthening corporate events, and continued robust demand from walking guests collectively delivered 6% same venue sales growth over 2019. Apparel, Gear, and Other also performed very well during the quarter with revenue up 33% year over year as strong brand momentum, recovery from COVID, and well-positioned products translated to strong sales growth in the quarter. Changes in foreign currency rates had a $6 million negative impact on fourth quarter 2021 revenues. Total costs and expenses were $755 million on a non-GAAP basis in the fourth quarter of 2021, compared to $397 million in the fourth quarter of 2020. Of the $358 million increase, Topgolf added an incremental $330 million of total costs and expenses. The remaining $28 million increase includes moving spending levels back toward normal levels, increased corporate costs to support a larger organization, investments in growth initiatives, including TravisMathew expansion and the Korea apparel business, and increased freight costs and inflation. Fourth quarter 2021 non-GAAP operating income was a loss of $43 million, down $21 million, compared to a loss of $22 million in the fourth quarter of 2020 due to the previously mentioned planned shift in Golf Equipment supply to 2022 launch products, as well as the increased costs previously mentioned. Non-GAAP other expense was $37 million in the fourth quarter, compared to other expense of $13 million in Q4 2020. The increase was primarily related to a $28 million increase in interest expense related to the addition of Topgolf. Non-GAAP loss per share was $0.19 on approximately 186 million shares in the fourth quarter of 2021, compared to a loss of $0.33 per share on approximately 94 million shares in the fourth quarter of 2020. Lastly, fourth quarter 2021 adjusted EBITDA was $14 million, compared to negative $13 million in the fourth quarter of 2020. The $27 million increase was driven by a $46 million contribution from the Topgolf business. As of December 31, 2021, available liquidity, which is comprised of cash on hand and availability under our credit facilities was $753 million, compared to $632 million at December 31, 2021, an increase of 19%. When we announced the merger over a year ago, the funding needs for Topgolf were estimated at $325 million. At this point, we estimate that Topgolf will need almost $200 million less funding than we originally anticipated. And going forward, we estimate Topgolf will only need incremental funding from Callaway of less than $70 million, which would be used for future venue growth. At quarter-end, we had a total net debt of $1.4 billion, including venue financing obligations of $593 million related to the development of Topgolf venues. Our net debt leverage ratio was 3.1 times at December 31, 2021, compared to five times at March 31, 2021. Consolidated net accounts receivable was $105 million, a decrease of 24%, compared to $138 million at the end of the fourth quarter of 2020. Days sales outstanding for our Golf Equipment and Apparel businesses improved to 35 days as of December 31, 2021, compared to 45 days as of December 31, 2020. Our inventory balance increased to $523 million at the end of the fourth quarter of 2021, compared to $353 million at the end of the fourth quarter 2020 as we built supply for our new products within the Golf Equipment and Apparel businesses. In addition, Topgolf added $22 million in inventory. Capital expenditures for the full year 2021 were $234 million, net of REIT reimbursements. This includes $173 million related to Topgolf, primarily for new openings for the 10 months since the merger. This does not include $12 million of capex for January and February of 2021 prior to the merger. The full year 2022 forecast for Callaway and Topgolf is approximately $310 million, net of REIT reimbursements, including approximately $230 million for Topgolf. Lastly, on December 13, we announced that our board of directors approved a $50 million stock repurchase program. We repurchased a total of approximately 947,000 shares at an average price of $26.41 during the quarter and now have approximately $25 million authorization remaining under that program. Now, turning to our full year and first quarter 2022 outlook on Slide 14 and 15. For the full year, we expect revenue to be approximately $3.8 billion. That compares to $3.13 billion in 2021. It also assumes approximately $1.5 billion in net revenue from Topgolf for the year. Full-year adjusted EBITDA is projected to be $490 million to $515 million, which assumes approximately to $210 million to $220 million from Topgolf. As Chip stated, we plan to add at least 10 new Topgolf venues in 2022, although the venue openings will be heavily weighted toward the back half of the year with five expected to open in the fourth quarter. Lastly, we anticipate a negative impact from changes in foreign currency rates of approximately $54 million on revenue and $38 million on pre-tax income due to a strengthening U.S. dollar and $8 million in hedge gains that are not expected to repeat. Lastly, looking at the share count for full year 2022, want to note an accounting change taking effect this year that will cause our share count to increase to approximately 204 million shares. When calculating EPS, we will eliminate the interest paid related to the bond, and we will add 14.7 million shares to the earnings per share calculation as if the bond had been converted. For purposes of this calculation, we do not include the benefit of the [Inaudible] transaction we entered into at the time of the bond issuance, which at maturity would reduce the number of new shares issued by us [Inaudible] conversion by approximately 4 million to 5 million shares at current prices. Our revenue guidance is just over $1 billion. Adjusted EBITDA guidance is $130 million to $145 million. This includes a negative foreign currency impact of approximately $21 million on revenue and $21 million in pre-tax income. Again, including the $8 million hedge gains in Q1 2021 that are not expected to repeat.

Looking ahead to 2022 and the consolidated company, we believe revenue will increase approximately 21%, and we expect adjusted EBITDA will be between $490 million and $515 million. Non-GAAP loss per share was $0.19 on approximately 186 million shares in the fourth quarter of 2021, compared to a loss of $0.33 per share on approximately 94 million shares in the fourth quarter of 2020. Full-year adjusted EBITDA is projected to be $490 million to $515 million, which assumes approximately to $210 million to $220 million from Topgolf. Lastly, we anticipate a negative impact from changes in foreign currency rates of approximately $54 million on revenue and $38 million on pre-tax income due to a strengthening U.S. dollar and $8 million in hedge gains that are not expected to repeat.

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Two, globally, Molson Coors' net sales revenue from its above premium portfolio has surpassed 25% of our brand volume net sales revenue on a trailing 12-month basis for the first time since the revitalization plan was announced. Fuel prices are up, truckers are in short supply around the world and freight costs are up 2%. We are once again shipping approximately one million barrels per week in the U.S., and that has helped us increase distributor inventories by approximately 20% over the past few weeks. Coors' growing share of the segment in Canada as well with Miller Lite also growing approximately 30% in the quarter. For the first nine months of the year, we have sold nearly two million cases of non-alcohol beverages as we continue to drive toward our $1 billion revenue ambition for our emerging growth business by 2023. It's the number one new energy franchise in 2021, and it's already a top 20 energy drink brand. Zoa already has 31,000 buying outlets and over 115,000 points of distribution with more coming online every day. Now hard seltzer is going to keep growing at 200% per year. There are over 10% of beer category sales and growing. Vizzy brand volumes grew 50% in the third quarter versus the prior year and passed yet another competitor to become the number four hard seltzer in the United States. Despite only being launched in 16 different markets in the U.S., Topo Chico Hard Seltzer occupies the number three slot as a new item in the general malt beverages category. The brand also garnered a 2.4% share of the U.S. market according to IRI, and this success has led to the national expansion of the brand. By the end of August, it was already available for purchase in 40,000 locations across the state. And this quarter, we announced plans to build upon the success of Blue Moon LightSky, which our data shows is 96% incremental to the flagship Belgian White. So much so that as of the third quarter, the percentage of Molson Coors portfolio that is above premium has surpassed 25% of our brand volume net sales revenue on a trailing 12-month basis for the first time since the revitalization plan was announced. In Western Europe, our new Mediterranean lager, Madre, has already doubled its distribution goal for the year, now at approximately 5,500 on-premise outlets with more coming in the fourth quarter. In Central and Eastern Europe, New Smooth pilsner lager Pravha, has been performing above expectations across the market with presence in more than 15,000 outlets supported with strong media campaigns, reaching over 13 million consumers. And in Latin America, Coors Light is growing in Puerto Rico for the first time in 15 years, where it sells at an above premium price point. As Gavin mentioned, we are again reaffirming our key financial annual guidance for 2021. Consolidated net sales revenue increased 1% in constant currency, delivering over 99% of third quarter 2019 level despite the on-premise continuing to operate below pre-pandemic levels. Consolidated financial volumes declined 3.9%, primarily due to lower brand volumes, which were down 3.6%, largely due to the economy segment, including the economy SKU deprioritization program. Net sales per hectoliter on a brand volume basis increased 3.6% in constant currency, driven by the strong pricing growth, coupled with positive brand and channel mix. Underlying COGS per hectoliter increased 8.9% on a constant currency basis, driven by cost inflation, including higher transportation and input costs, mix impact from premiumization and volume deleverage. Underlying MG&A in the quarter increased 3.5% on a constant currency basis due to higher marketing investment behind our core brands and innovation as well as parking targeted reductions to marketing spend in the prior year period due to the pandemic, which was largely offset by lower G&A expenses. As a result of these factors, underlying EBITDA decreased 10.9% on a constant currency basis. You may recall in the second quarter of last year following the issuance of certain U.S. tax regulations, we recognized a material discrete tax expense of $135 million. As a result of the settlement, we had a release of unrecognized tax benefit positions in the quarter that resulted in a P&L tax benefit of $68 million, including a $49 million discrete tax benefit in the third quarter. Underlying free cash flow was $933 million for the first nine months of the year, a decrease in cash received of $227 million, from the prior year period. As a reminder, in 2020, working capital was positively impacted by over $200 million for benefits related to these government tax deferral program. Capital expenditures paid was $363 million for the first nine months of the year as we continue to invest behind capability programs such as our previously announced Golden Brewery modernization project and our new Montreal brewery expected to open by year-end. In the third quarter, the on-premise channel accounted for approximately 14% of our net sales revenue in the quarter, compared to approximately 12% in the second quarter of 2021 and 16% in the same period in 2019. In the U.S., the on-premise accounted for about 88% of 2019 net sales revenue in the quarter. In Canada, restrictions continue to ease throughout the quarter with the on-premise net sales rising to 80% of 2019 levels in the third quarter, up from about 25% in the second quarter. North America net sales revenue was down 2.1% in constant currency as net pricing growth and positive brand mix were more than offset by lower volume. In the U.S. domestic shipment volumes decreased 6.6%, trailing brand volume declines of 5.2%, driven by unfavorable shipment timing and declines in the deprioritized economy segment. Economy was down double digits as we deprioritize and announced the rationalization of approximately 100 non-core SKUs, which were primarily in the economy segment. Canada brand volumes improved 0.5% in the quarter, and Latin America brand volumes continued their strong performance and experienced 9% growth, reflecting the easing of on-premise restrictions. Net sales per hectoliter on a brand volume basis increased 2.4% in constant currency with net pricing growth and favorable brand mix, partially offset by unfavorable geographic mix given the growing license volume in Latin America. U.S. net sales per hectoliter increased 3.2%, driven by net pricing growth and positive brand mix, led by best premium innovation brands, including Vizzy, Topo Chico Hard Seltzer and Zoa. Underlying cost per hectoliter increased 7.3%, driven by inflation, including higher transportation and packaging materials and brewery costs, volume deleverage and mix impact from premiumization. Underlying MG&A decreased 1% as higher marketing investments were offset by lower G&A due to lower incentive compensation expense and the recognition of the Yuengling Company joint venture equity income. North America underlying EBITDA decreased 14.3% in constant currency. Europe net sales revenue was up 14.7% in constant currency, with an 11% increase in net sales per hectoliter on a brand volume basis driven by positive brand, channel, geographic and packaging mix and positive net pricing. Europe financial volumes decreased 2% and brand volumes decreased 3%. Underlying EBITDA increased 2.7% in constant currency as revenue growth was partially offset by higher marketing investments. As of September 30, 2021, we had lowered our net debt to underlying EBITDA ratio to 3.3 times and reduced our net debt to $6.6 billion, down from 3.5 times and $7.5 billion, respectively, as of December 31, 2020. On July 15, we announced that we had repaid in full the $1 billion, 2.1 senior notes that are maturing that day using a combination of commercial paper and cash on hand. We ended the third quarter with strong borrowing capacity with approximately $1.5 billion available capacity under our U.S. credit facility. Also, we expect continued solid progress against our previously discussed emerging gross revenue goal of $1 billion in annual revenue by 2023, against which we continue to track ahead of plan driven by Zoa, La Colombe and Latin America. We continue to anticipate underlying depreciation and amortization of $800 million, and net interest expense of $270 million, plus or minus 5%. However, due solely to the discrete tax benefit in the third quarter, we have adjusted our effective tax rate range for 2021 only to 13% to 15% from 20% to 23% previously. Also, as a reminder, in 2020, our working capital benefited from the deferral of approximately $130 million in tax payments from various government-sponsored payment deferral programs related to the coronavirus pandemic. As such, we expect to continue to improve our net debt position and reaffirm our target net debt to underlying EBITDA ratio to be approximately 3.25 times by the end of 2021, and below three times by the end of 2022. And third, on July 15, our Board of Directors determined to reinstate a quarterly dividend on our Class A and Class B common shares and declared a quarterly dividend of $0.34 per share payable on September 17.

As Gavin mentioned, we are again reaffirming our key financial annual guidance for 2021. Consolidated financial volumes declined 3.9%, primarily due to lower brand volumes, which were down 3.6%, largely due to the economy segment, including the economy SKU deprioritization program. Net sales per hectoliter on a brand volume basis increased 3.6% in constant currency, driven by the strong pricing growth, coupled with positive brand and channel mix. We continue to anticipate underlying depreciation and amortization of $800 million, and net interest expense of $270 million, plus or minus 5%.

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We remain confident in our ability to exceed $1 billion of digital revenue in 2021, supported by continued strong growth in our wu.com business and our digital partnership business. Today, we separately announced that, we reached a definitive agreement to sell our Business Solutions business to Goldfinch Partners and the Baupost Group for $910 million. With the planned sale of Western Union Business Solutions, which was approximately 7% of total company revenue during the last 12 months ended June 30th, 2021, now we will be fully focused on increasing our penetration of the global cross-border consumer payments market, expanding our digital partnership business and increasing our total addressable market, through our Western Union branded ecosystem strategy. On a year-to-date basis, our new agent signings will expand our network by approximately 18,000 retail locations. We have also renegotiated contracts with over 50 agents' year-to-date, reflecting our commitment to optimize commissions. Finally, we continue to enhance our global account payout capabilities, which is now available in over 125 countries with real-time capabilities in approximately 100 countries. Over 60% of our global account payout transaction volume was delivered real-time. During the quarter, we saw continued strength in principal per transaction or PPT with growth over 11% and cross-border total principal growth of 29%, benefiting from continued demand for support in received markets and improving economic and employment trends in central regions like the U.S. and Western Europe. Total company revenue grew 16% or 13% on a constant currency basis, with underlying trends aided by continued growth in our digital business and sequential improvement in the retail business. C2C revenues and transactions, each grew 15% in the quarter with C2C revenue growing 12% on a constant currency basis. Digital revenues were up from the first quarter and grew 22% year-over-year to over $265 million with quarterly highs for revenue, transactions and principal. Digital comprised 36% of transactions and 24% of revenues for the C2C segment. Wu.com results were healthy with transaction growth over 18%, driven by 14% growth in average monthly active users. Wu.com continue to lead money transfer appears in mobile app downloads by a wide margin and grow principle over 30%. Our domestic and international money transfers, bill payments and money order services are now available in nearly 4,700 Walmart stores across the US. Moving to the second quarter results, revenue of $1.3 billion increased 16%, on a reported basis or 13% constant currency. Currency translation, net of the impact from hedges benefited second quarter revenues by approximately $29 million compared to the prior year. In the C2C segment, revenue increased 15%, on a reported basis or 12% constant currency, with transaction growth partially offset by mix. B2C transactions grew 15% for the quarter led by 33% transaction growth in digital money transfer, and supported by growth in retail money transfer, which improved sequentially, particularly in North America and Europe and CIS. Total C2C cross-border principal increased 29% on a reported basis or 25% constant currency driven by growth in retail and digital money transfer. Total C2C Principal per Transaction or PPT was up 11% or 8% constant currency. Digital money transfer revenues which include wu.com and digital partnerships increased 22% on a reported basis or 19% constant currency. Wu.com revenue grew 18% or 15% constant currency on transaction growth of 18%. Wu.com cross-border revenue was up 23% in the quarter. Moving to the regional results, North America revenue increased 4% on both a reported and constant currency basis, on transaction growth of 3%. US domestic money transfer represented approximately 4% of total C2C revenue in the quarter. Revenue in the Europe and CIS region increased 18% on a reported basis or 10% constant currency on transaction growth of 26%. Revenue in the Middle East, Africa and South Asia region increased 19% on a reported basis or 18% constant currency, while transactions grew 22%. Revenue growth in the Latin America and Caribbean region was up 70% or 68% constant currency on transaction growth of 42%. Revenue in the APAC region increased 20% on a reported basis or 13% constant currency led by the Philippines and Australia. Transactions increased 3% with the Philippines driving the difference between constant currency revenue and transaction growth. Business Solutions revenue increased 25% on a reported basis or 16% constant currency, benefiting from favorable comparisons to prior year. The segment represented 8% of company revenues in the quarter. Other revenues represented 5% of total company revenues and increased 8% in the quarter. The consolidated GAAP operating margin in the quarter was 19.8% compared to 19. 9% in the prior year period. While the consolidated adjusted operating margin was 20.2% in the quarter compared to 20.4% in the prior year period. Foreign exchange hedges had a negative impact of $2 million on operating profit in the current quarter and a benefit of $7 million in the prior year period. B2C operating margin was 20.7% compared to 21.8% in the prior year period. Business Solutions operating margin was 10.9% in the quarter compared to 1.6% in the prior year period. Other operating margin was 16.2%, compared to 21.9% in the prior year period, with the decrease driven by higher M&A expenses, related to the divestiture of Western Union Business Solutions announced today. The GAAP effective tax rate in the quarter was 14.5%, compared to 16.2% in the prior year period, while the adjusted effective tax rate in the quarter was 14.2%, compared to 15.7% in the prior year period. GAAP Earnings per Share or earnings per share was $0.54 in the quarter compared to $0.39 and in the prior year period, while adjusted earnings per share was $0.48 in the quarter compared to $0.41 in the prior year period. The net impact of these two items was a $0.07 benefit to GAAP earnings per share in the quarter. Turning to our cash flow and balance sheet, year-to-date cash flow from operating activities was $349 million. Capital expenditures in the quarter were approximately $48 million. At the end of the quarter, we had cash of $1.1 billion and debt of $3 billion. We returned $171 million to shareholders in the second quarter, consisting of $96 million in dividends and $75 million in share repurchases. The outstanding share count at quarter end was 407 million shares. And we had $633 million remaining under our share repurchase authorization, which expires in December of this year. The sales price of $910 million is expected to generate in excess of $800 million in proceeds, net of tax in 2022 and result in a gain on sale. As a reference point, during the last 12 months ended June 30th, 2021, the Business Solutions segment generated revenue, EBITDA and operating profit of $374 million, $64 million and $33 million, respectively. Turning to our outlook for 2021, the outlook we provided today assumes moderate improvement in macroeconomic conditions as the quarters' progress in line with current prevailing macroeconomic forecast with no material changes related to the COVID-19 pandemic. We reaffirmed our expectations for revenue growth, including our expectation that the digital business will achieve over $1 billion in revenue this year. The pension plan termination is expected to accelerate the recognition of approximately $110 million of non-cash expenses on a pre-tax basis, lowering GAAP earnings per share by approximately $0.22 in the fourth quarter and will be recorded to other expense in the P&L. With our plan over funded by more than $35 million as of June 30, we believe it is a good time to transition the plan to an annuity provider. GAAP operating margin is expected to be approximately 21% and adjusted operating margin is expected to be approximately 21.5% with the difference attributable to M&A costs. GAAP earnings per share for the year is now expected to be in a range of $1.82 to $1.92, which now reflects the impact of pension plan termination expenses and M&A costs. Adjusted earnings per share is still expected to be in the range of $2 to $2.10. We continue to expect to generate over $1 billion in digital revenue this year, along with a relatively stable retail business. With respect to margins, we expect the margin for the second half of the year will be above our full-year adjusted margin outlook of approximately 21.5%, primarily driven by expected higher revenue levels.

C2C revenues and transactions, each grew 15% in the quarter with C2C revenue growing 12% on a constant currency basis. Moving to the second quarter results, revenue of $1.3 billion increased 16%, on a reported basis or 13% constant currency. In the C2C segment, revenue increased 15%, on a reported basis or 12% constant currency, with transaction growth partially offset by mix. GAAP Earnings per Share or earnings per share was $0.54 in the quarter compared to $0.39 and in the prior year period, while adjusted earnings per share was $0.48 in the quarter compared to $0.41 in the prior year period. Turning to our outlook for 2021, the outlook we provided today assumes moderate improvement in macroeconomic conditions as the quarters' progress in line with current prevailing macroeconomic forecast with no material changes related to the COVID-19 pandemic. Adjusted earnings per share is still expected to be in the range of $2 to $2.10.

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Overall demand in the second quarter was robust and much stronger than we expected just 90 days ago. Same-property revenues of $162.5 million were down 57.8% versus the same period in 2019. This was a significant improvement from the first quarter when same-property revenues were down 74.7% versus 2019. Sequentially, same-property revenues grew 95.4% from Q1 to Q2. June same-property revenues were more than 50% higher than April, and July is expected to be almost 20% higher than June, an encouraging turnaround in such a short time. This accelerating strength in hotel demand during the second quarter allowed us to generate $17.1 million of adjusted EBITDA. This is a dramatic improvement compared with a negative $25 million of adjusted EBITDA for the first quarter of 2021 and demonstrates the rapid turnaround for our portfolio, and the results improved substantially every month throughout the quarter. Adjusted FFO per share was a negative $0.12 per share, better than the negative $0.42 per share from the first quarter. Drilling down to our hotel operating results for same-property RevPAR versus the comparable period in 2019, April was down 66.3%, May was down 60.1% and June was down 51.6%. We're forecasting July to be down 38% to 42%, continuing the very positive recovery trend. For the third quarter, we currently expect RevPAR to also be down between 30% and 42% compared with the comparable period in 2019, which also continues the improving quarterly trend. Total hotel level expenses of $134.2 million were reduced by 45.1% versus Q2 2019. Expenses before fixed costs, like property taxes and insurance, were cut by 50.9%. Our total property-level expense reduction was 78% of the revenue decline and 88% before fixed expenses, pretty incredible, frankly. Our eight resorts generated a positive $28.4 million of hotel EBITDA in the quarter. This resulted from an occupancy of 66% at an average daily rate of $386, which is more than $107 and a 38% increase over the comparable 2019 second quarter. As a result, total revenue per occupied room was 17% higher than Q2 2019. This allowed our resorts to produce $28.4 million of EBITDA in the second quarter, a 17.5% increase over the comparable period in 2019 and a $13.9 million improvement almost doubling from Q1. EBITDA margins were up an impressive 622 basis points from Q2 2019. Occupancy was 33.3%, ADR reached $198 and total revenues were $91.6 million. Urban hotels were just under the breakeven level in second quarter with a negative EBITDA of just $0.8 million. Yet in our sequential world, our urban hotels achieved $5.3 million of EBITDA in June with a 43.5% occupancy and a $210 ADR. Impressive results considering the still low occupancy levels in our urban markets and operationally, not something we would have thought possible before the pandemic started. In the second quarter, we completed an $11.7 million redevelopment of L'Auberge in Del Mar in South California. In early July, we completed -- we commenced the $25 million transformation of Hotel Vitale to 1 Hotel San Francisco and a $15 million comprehensive guest room renovation at the Southernmost Resort in Key West. We expect the 1 Hotel to be completed by the end of this year and Southernmost early in the fourth quarter. For 2021, we anticipate reinvesting a total of $70 million to $90 million in the portfolio, which is in line with our prior estimate. Combined with previous sales we completed since June of last year, this represents approximately $330 million of sales proceeds to reallocate into other assets. In late June, we executed a contract to acquire Margaritaville Hollywood Beach Resort in Hollywood, Florida for $270 million. This acquisition is anticipated to be funded from existing cash on hand and through the assumption of $161.5 million of favorably priced existing nonrecourse property debt. And last week, we completed the acquisition of the iconic Jekyll Island Club Resort for $94 million. As a result of these property sales and acquisitions and assuming Villa Florence is sold and Margaritville is acquired, our 10 resorts will comprise roughly 23% to 24% of our 2019 same-property EBITDA. Our San Francisco share in 2019 dollars were declined to 19% with 10 properties, and our Southeast focus will increase to 15% with five resorts and one hotel. Of course, the world moving forward will be different, and we expect these 10 resorts will likely represent a more significant percentage of our EBITDA on a go-forward basis than they did in 2019. On May 13, we raised $230 million of capital through our 6.375% Series G preferred equity raise. On July 27, we successfully raised $250 million through our 5.7% Series H preferred equity raise, the largest preferred offering ever in the lodging space and equal to the lowest rate ever. This raise refinances an equivalent amount of higher price redeemable preferable securities, our 6.5% Series C preferred shares and 6.375% Series D preferred shares. This effect of $250 million swap will reduce our preferred dividend payments by approximately $1.8 million annually or $0.014 per share. After completing our Jekyll Island Resort acquisition, we have approximately $875 million of liquidity, which includes roughly $230 million of cash on hand and $644 million available on our unsecured credit facility. We also have approximately $235 million of reinvestment proceeds available under our current bank arrangements. April RevPAR was 22.4% higher than March, may was 20.3% higher than April and then June rose even more, up 32.1% to May. We think July will be up 25% to June. We estimate that business travel doubled from the first quarter and probably recovered to about 30% to 40% of 2019 levels by the end of the second quarter. The airlines who certainly have more visibility than our industry have indicated they believe that business travel will improve to 50% to 60% of 2019 levels by the end of the third quarter, with further improvement through the end of the year and into next year. Their forecast seems reasonable given the bookings we've been seeing and the significant advances each month in urban weekday occupancies, which improved from 24.5% in March to 39% by June, and they look like they'll be up to around 47% or 48% in July. Overall, urban occupancy rose from 29.5% in March to 43.8% in June, just below our overall portfolio occupancy for June of 46.4% July looks to be over 52%. In July, looks like occupancies at our properties in San Francisco will average around 30%; L.A., 64%; San Diego, 74%; Portland, 58%; Seattle, 58%; D.C., 34%; and Boston at 66%. For example, ADR year-to-date at LaPlaya in Naples is up $159 or 34% from the first half of 2019. And ADR for business on the books in both Q3 and Q4 is ahead by a whopping $250 versus same time 2019 or roughly 100% increase in Q3 and 70% in Q4. And consider this, total room revenue currently on the books at LaPlaya is $5.8 million ahead of total room revenue achieved for all of 2019, and we're only in July with five more months to book into this year. On the other side of the country, at L'Auberge Del Mar in Southern California, where we just completed a highly impactful $11.7 million luxury redevelopment in Bay. In June, we achieved an average rate $258 or 66% higher than for June 2019. Rate currently on the books for July is at $878. That's $372 or 73% higher than July 2019. This past weekend, the resort ran 97% at a rate handily over $1,000. At Paradise Point just down the road in Mission Bay, San Diego, Q3 ADR on the books is currently at $450 versus $269 for Q3 2019. Transient revenue on the books for 2021 is already $2.8 million ahead of total transit revenue achieved for all of 2019. Just across the water from Paradise Point at San Diego Mission Bay Resort, which was a Hilton when we acquired LaSalle and where a year ago we completed a $32 million multiphase transportation -- transformation of the property into a luxury independent resort, ADR is climbing as well compared to 2019. In Q2, we achieved a 23% higher rate than Q2 2019 as we established this new independent resort and gained significant ADR share versus our market competitors. For Q3, as we gain momentum, ADR is the books is currently ahead by $115 or 46% compared to Q3 2019. At The Marker in Key West, we've also gained ADR and RevPAR share on our competitors following the $5 million of upgrades we made in 2019 at this small 96-room resort. In Q2, ADR was up 45% or $143 to $459 compared to $316 in Q2 '19. The third quarter is running $157 or 65% higher versus Q3 2019. While in most cases we haven't yet achieved rates higher than 2019, we have grown our city ADR significantly since the pandemic recovery earlier this year, even as we reopened our hotels in the slower-to-recover markets, like Chicago, San Francisco and D.C. Average rate for our urban hotels has grown every month from a low of $155 in January to $158 in February to $160 in March to $175 in April, $196 in May and finally reaching $206 in June. In July, we look to be up again as ADR achieved at our urban properties has increased another 10% from June at $227 through July 25, and rate on the books for the fall is running even higher. At The Nines in Portland, where our luxury collection hotel is the market rate leader and the only luxury property in the city, ADR in the second quarter was down just 7% in Q2 at $250 and our rate on the books is currently running 9% higher than third quarter 2019, the Nines benefits from its number one position in the city and its high-quality suites and event spaces that appeal to high-end leisure and business travelers. At the Mondrian in West Hollywood, where we completed a major comprehensive renovation just two years ago, ADR in Q2 recovered to within 4% of Q2 2019. Third quarter ADR in the books at Mondrian is currently within 1% of same time 2019 and Q4 rate is up over 10% compared to same time 2019. Le Parc in L.A., which received an $80,000 per key upgrading and repositioning just a year ago, is also closing in on 2019 rates on its way to even higher rates. In Q2, ADR was down just 5.5% from Q2 '19. In Boston, at The Liberty, which is one of the most unique and popular higher-end properties in Boston, we've achieved a $332 ADR month-to-date through July 25, and it's doing this at an impressive 86% occupancy level. While we're not yet back to the $375 rate and 97% occupancy we achieved in July 2019, The Liberty, like our other properties in Boston, has certainly come back a long way from January's 30% at $186 and April's 61% at $210. In fact, we're currently forecasting that July's same-property ADR will reach $270 to $275, which will exceed July 2019's ADR by $5 to $10. For example, in June, with total revenues down 50% from 2019, our hotel EBITDA margin was 23.7%. But for July, with 20% sequential growth in revenues, our hotel EBITDA margin should recover to around 27% to 28%. While this is still lower than the 35.5% achieved in July 2019, it's a heck of a lot closer in a much shorter time than we were expecting just three months ago. Yet not surprisingly, group revenue on the books for Q3 and Q4 is down about 64% and 54%, respectively, versus same time in 2019 for the same quarters. And as of July, we had about 32% fewer group nights on the books, but it's at a 5% higher ADR as compared to the same time in 2018 for 2019. In this case, very similar to what we've been accomplishing at Skamania Lodge over the last 10 years and with much more to come there as well. This would be similar to what we did with the two historic bread and breakfast buildings at Southernmost Resort in Key West where we consistently achieve $100 to $200 or more in rate premiums than the rest of the resort because of the higher personal service and special exclusive club atmosphere that was created and that higher-end guests find very appealing.

Adjusted FFO per share was a negative $0.12 per share, better than the negative $0.42 per share from the first quarter. We're forecasting July to be down 38% to 42%, continuing the very positive recovery trend.

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Net income for the second quarter of 2020 included net after-tax realized investment gains of $25.4 million and an after-tax impairment loss of $10 million on the right-of-use asset related to one of our operating leases on an office building, we do not plan to continue to occupy. Net income in the second quarter of 2019 included a net after-tax realized investment loss of $5.7 million. As a reminder, net realized investment gains and losses include changes in the fair value of an embedded derivative in a modified coinsurance arrangement, which resulted in an after-tax realized gain of $33.1 million in the second quarter of 2020 and an after-tax realized investment loss of $600,000 in the year ago quarter. Therefore, the net after-tax realized investment loss from sales and credit losses totaled $7.7 million in the second quarter of 2020. So excluding these items, after-tax adjusted operating income in the second quarter of 2020 was $250.1 million or $1.23 per diluted common share compared to $286.9 million or $1.36 per diluted common share in the year ago quarter. Adjusted operating earnings per share were $1.23, which is down from the $1.36 of the year ago second quarter, but was solid overall given the headwinds of the market. We continue to see growth in premiums, which were up 1.7%, while underlying business origination was more mixed. Unum US Total sales declined just under 3%. International sales increased just over 1%, while Colonial Life sales declined 43%, reflecting the challenges of face-to-face sales. We expect premium income for our core business segments to be flat to a slight increase for full year 2020 after increasing just over 2% in the first half. In fact, what we saw was that death rates were similar to our overall non-COVID age distribution, negatively affecting our U.S. group life block and our other life insurance blocks within our voluntary benefits businesses and the U.K. On the other hand, higher mortality drove significantly higher claim terminations in the long-term care block resulting in the interest adjusted loss ratio of 67%, which is well below historical trends. Our capital metrics remained solid with RBC at approximately 370% and holding company cash of $1.6 billion. We estimate that COVID produced a net unfavorable impact to our claims experience of between $12 million and $16 million, with the biggest unfavorable impacts occurring within Unum US group life the overall Unum UK results and the Closed Disability Block. The second category covers impacts to net investment income and the investment portfolio, which we estimate in the range of $24 million to $28 million unfavorable. In all, these items produced an unfavorable impact in the high $40 million to $50 million range on a before-tax basis for the second quarter. Adjusted operating income declined 9% to $231.9 million, primarily reflecting adverse mortality impacts from COVID-19 on the group life business, along with higher expenses in our leave management operation. Premium growth for Unum US in the second quarter was 1.2% year-over-year, which is a slightly lower trend than we have seen in recent quarters. The current sales environment remains challenging, declining by 2.9% in total for the segment. As we expected, we saw better sales results in the large case market for group products with those sales advancing 9.5% compared to a decline of 3.6% for sales of core market group products using 2,000 lives as a dividing line. Claims trends for Unum US showed a wide range of results in the second quarter, but the benefit ratio for this segment was generally consistent year-over-year at 68.1% compared to 67.6% in the year ago quarter, reflecting our broad diversification within the employee benefits market. The group disability line continue to show strong performance producing an improved benefit ratio of 72.8% in the quarter compared to 74.7% last year, driven by strong claim recoveries. This pushed the benefit ratio significantly lower to 36% from 71.6% last year. The group life and AD&D line had a sharp decline in adjusted operating income to $19.4 million in the quarter from $62.7 million a year ago as the benefit ratio increased significantly to 81.8% in the quarter from last year's 72.9%, predominantly driven by COVID-19-related mortality. We experienced an increase in the number of paid claims this quarter by approximately 12% or slightly over 900 excess claims, along with an increase in the average claim size by approximately 7%. In addition, at the end of the second quarter, we estimated an additional number of incurred but not reported COVID claims leading to an increase in the IBNR reserve balance for group life of $7 million. To put this into perspective, the total impact to the quarter was approximately 1,100 excess life claims above our quarterly average, which is slightly less than 1% of the approximately 120,000 COVID-19 deaths reported by Johns Hopkins in the second quarter. The Colonial Life segment produced very good earnings this quarter with adjusted operating earnings of $90.9 million, an increase of 7.7% over the year ago quarter. Premium income increased 4.2% as persistency held up well, offsetting the decline we are seeing in new sales activity. This quarter, new sales declined by 43%, reflecting the challenges of selling and enrolling in what has traditionally been a face-to-face sales environment. The benefit ratio was slightly lower at 50.7% compared to 51.4% a year ago as improved results in accident, sickness and disability and cancer and critical illness offset the incrementally higher mortality we experienced in the business. Results in our Unum International segment remained weak this quarter with adjusted operating income of $15.1 million compared to $30.7 million a year ago. Additionally, like our U.S. group life trends, we experienced higher mortality in the U.K. group life block, which represents a little less than 20% of the overall U.K. business. Premium income, however, did increase in both Unum UK, up 1.9%; and Unum Poland, up 11.1%, both in local currency. The Closed Block segment produced a very good quarter with adjusted operating income increasing almost 9% to $36.7 million. In total, net investment income for the Closed Block segment declined 8% in the second quarter to $326.3 million. Along with these higher potential returns over the long-term income volatility in quarterly investment income, that was evident this quarter with a negative market value adjustment on these investments of $31.3 million reflecting market values at March 31, which are reported on a lagged basis. To put this in perspective, in 2019, we reported average quarterly positive marks of approximately $8 million a quarter. Therefore, there is a positive market value adjustment of $10 million in the second quarter compared to the $17 million negative adjustment in the first quarter. The second quarter interest adjusted loss ratio dropped to 67%, bringing the rolling four quarters ratio to 81.1%, well below the expected range of 85% to 90%. The favorable results were primarily driven by elevated claim mortality, which was approximately 30% higher than average this quarter. Given the uncertainty of the timing of future claim filings, as a result of the pandemic, we did increase the incurred but not recorded reserve for long-term care by an incremental $20 million in the quarter. Also related to LTC, we made further progress this quarter with several new rate increase approvals on in-force business, and now we're at 65% of our $1.4 billion reserve assumption. The Closed Disability Block experienced an increase in the interest adjusted loss ratio to 89.5% in the quarter from 81.3% a year ago, driven primarily by higher submitted incidents. A few points to highlight are: first, net after-tax realized investment losses from sales and credit losses declined to $7.7 million in the second quarter from $44.4 million in the first quarter of this year. Second, downgrades of investment-grade securities to high-yield totaled $193 million for the second quarter compared to $336 million in the first quarter. You'll recall, we previously referenced $119 million of downgrades that occurred in April. The increase in second quarter downgrades created a minimal $11 million increase to required capital, which impacted the second quarter RBC ratio by only one point. And then third, the net unrealized gain position on the fixed maturity securities portfolio improved to $7.4 billion in the second quarter from $4.3 billion at the end of the first quarter. Within that, the Energy Holdings, which do total 9.2% of our fixed maturity securities moved to a net unrealized gain position of $437 million from a net unrealized loss of $350 million, a significant improvement in values due to spread tightening, given the recovery in economic and oil prices. In the first quarter, we outlined an investment credit scenario for defaults and downgrades of investment-grade securities to high-yield for 2020, that assumed as a base case $85 million of defaults and $1.6 billion of downgrades. Our capital forecast now includes $70 million of defaults and $1.3 billion of downgrades in 2020, including what we have already experienced. We finished the second quarter in very good shape with the risk-based capital ratio for our traditional U.S. insurance companies at approximately 370%, above the 350 targeted level and holding company cash at $1.6 billion. We target maintaining holding company cash at greater than 1 times our fixed obligations, which is approximately $400 million. During the second quarter, we issued $500 million of debt. And as a reminder, we have a $400 million debt maturity in September. Beyond this upcoming maturity, the next maturity is not until 2024. In addition, an important driver of our capital position is after-tax statutory operating earnings in our traditional and U.S. insurance companies, which were quite strong again in the second quarter, totaling $327 million compared to $278 million in the year ago quarter.

So excluding these items, after-tax adjusted operating income in the second quarter of 2020 was $250.1 million or $1.23 per diluted common share compared to $286.9 million or $1.36 per diluted common share in the year ago quarter. Adjusted operating earnings per share were $1.23, which is down from the $1.36 of the year ago second quarter, but was solid overall given the headwinds of the market. Beyond this upcoming maturity, the next maturity is not until 2024.

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Our occupation is currently 97%, leasing activity is strong, and turnover remains low. Same-property revenue growth was 4.1% for the quarter and was positive in all markets, both year-over-year and sequentially. We have remarkable growth in Phoenix and Tampa both at 9.1%, Southeast Florida at 8.6%, Atlanta at 5.7% and Raleigh at 4.6%. We thought the April new lease and renewal numbers we reported on last quarter's call were pretty good at nearly 5%. For the second quarter of '21, signed new leases were 9.3% and renewals were 6.7% for a blended rate of 8%. For leases which were signed earlier and became effective during the end -- during the second quarter, new lease growth was 5.4% with renewals at 4% for a blended rate of 4.7%. July 2021 looks to be one of the best months we've ever had with new signed -- signed new leases trending at 18.7%, renewals at 10.5% and a blended rate of 14.6%. Renewal offers for August and September were sent out with an average increase of around 11%. Occupancy has also continued to improve, going from 96% in the first quarter this year to 96.9% in the second quarter and is currently at 97.1% for July. Net turnover ticked up slightly in the second quarter to 45% versus 41% last year due to the aggressive pricing increases we instituted, but it remains well below long-term historical levels. Move-outs to home purchases also ticked up slightly from 16.9% in the first quarter this year to 17.7% in the second quarter, which reflects normal seasonal patterns in our markets. So despite the constant headlines regarding increased number of single-family home sales, it really has not had an effect on our portfolio performance as the move-outs to purchase homes are still slightly below our long-term average of about 18%. Improving the lives of our team and customers has in turn improved the lives of shareholders, including the approximately 500 Camden employees who participated in the employee share purchase plan this year. During the second quarter of 2021, as previously mentioned, we entered the Nashville market with a $186 million purchase of Camden Music Row, a recently constructed, 430-unit, 18-story community and the $105 million purchase of Camden Franklin Park, a recently constructed 328-unit, 5-story community. Both assets were purchased at just under a 4% yield. Also, during the quarter, we stabilized both Camden RiNo, a 233-unit $7 million new development in Denver, generating an approximate 6% yield in Camden Cypress Creek II, a 234-unit joint venture in Houston, Texas, generating an approximate 7.75% yield. Additionally, during the quarter, we began leasing at Camden Hillcrest, a 132-unit, $95 million new development in San Diego. On the financing side, during the quarter, we issued approximately $360 million of shares under our existing ATM program. In the quarter, we collected 98.7% of our scheduled rents with only 1.3% delinquent. For multifamily residents, we have currently reserved $11 million as uncollectible revenue against a receivable of $12 million. Last night, we reported funds from operations for the second quarter of 2021 of $131.2 million or $1.28 per share, exceeding the midpoint of our guidance range by $0.03 per share. This $0.03 per share outperformance for the second quarter resulted primarily from approximately $0.03 in higher same-store NOI, resulting from $0.025 of higher revenue, driven by higher rental rates, higher occupancy and lower bad debt and $0.05 of lower operating expenses driven by a combination of lower water expense and lower salaries due to open positions on site and approximately $0.02 in better-than-anticipated results from our non-same-store and development communities. This $0.05 aggregate outperformance was partially offset by $0.01 of higher overhead costs, primarily associated with our employee stock purchase plan, combined with a $0.01 impact from our higher share count resulting from our recent ATM activity. Taking into consideration the previously mentioned significant improvement in new leases, renewals and occupancy, and our resulting expectations for the remainder of the year, we have increased the midpoint of our full year revenue growth from 1.6% to 3.75%. Additionally, as a result of our slightly better-than-expected second quarter same-store expense performance and our anticipation of the trend continuing throughout the year, we decreased the midpoint of our full year expense growth from 3.9% to 3.75%. The result of both of these changes is a 350 basis point increase to the midpoint of our 2021 same-store NOI guidance from 0.25% to 3.75%. Our 3.75% same-store revenue growth assumptions are based upon occupancy averaging approximately 97% for the remainder of the year, with the blend of new lease and renewals averaging approximately 11%. Last night, we also increased the midpoint of our full year 2021 FFO guidance by $0.18 per share. Our new 2021 FFO guidance is $5.17 to $5.37 with a midpoint of $5.27 per share. This $0.18 per share increase results from our anticipated 350 basis points or $0.21 increase in 2021 same-store operating results, $0.03 of this increase occurred in the second quarter, with the remainder anticipated over the third and fourth quarters and an approximate $0.06 increase from our non-same-store and development communities. This $0.27 aggregate increase in FFO is partially offset by an approximate $0.09 impact from our second quarter ATM activity. We have made no changes to our full year guidance of $450 million of acquisitions and $450 million of dispositions. We expect FFO per share for the third quarter to be within the range of $1.30 to $1.36. The midpoint of $1.33 represents a $0.05 per share improvement from the second quarter, which is anticipated to result from a $0.04 per share or approximate 2.5% expected sequential increase in same-store NOI, driven primarily by higher rental rates, partially offset by our normal second to third quarter seasonal increase in utility, repair and maintenance, unit turnover and personnel expenses. A $0.015 per share increase in NOI from our development communities in lease-up, our other nonsame-store communities and the incremental contributions from our joint venture communities. And a $0.02 per share increase in FFO resulting from the full quarter contributions of our recent acquisitions. This aggregate $0.075 increase is partially offset by $0.025 incremental impact from our second quarter ATM activity. Our balance sheet remains strong with net debt-to-EBITDA at 4.6 times and a total fixed charge coverage ratio at 5.4 times. As of today, we have approximately $1.2 billion of liquidity, comprised of approximately $300 million in cash and cash equivalents and no amounts outstanding under our $900 million unsecured facility. At quarter-end, we had $302 million left to spend over the next three years under our existing development pipeline, and we have no scheduled debt maturities until 2022. Our current excess cash is invested with various banks, earning approximately 25 basis points.

Last night, we reported funds from operations for the second quarter of 2021 of $131.2 million or $1.28 per share, exceeding the midpoint of our guidance range by $0.03 per share. Our new 2021 FFO guidance is $5.17 to $5.37 with a midpoint of $5.27 per share. We expect FFO per share for the third quarter to be within the range of $1.30 to $1.36.

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We achieved $0.89 in adjusted earnings per share and $60 million of adjusted EBITDA above the midpoint of our forecasted ranges and driven by the quick rebound to double-digit worksite employee growth from the pandemic lows experienced in the prior year. As per our growth metric, the average number of paid worksite employees increased by 11% over Q3 of 2020, above the high end of our forecasted range of 9.5% to 10.5%. This was a sequential increase of 6% over Q2 of 2021. The accelerated worksite employee growth was driven by net gains from hiring in our client base exceeding our targets, worksite employees paid from new sales and third quarter client retention of 99%. Now along with worksite employee growth, our revenue per worksite employee, which reflected a 4% increase in pricing and the non-recurrence of the 2020 FICA deferral also exceeded our expectations. Q3 cash operating expenses increased 9% over the prior year, slightly below forecasted levels. During the quarter, we repurchased 106,000 shares of stock at a cost of $11 million, bringing our year-to-date repurchases up to 544,000 shares at a cost of $50 million. Additionally over the course of the first three quarters of this year, we have paid out $50 million in cash dividends and invested $24 million in capital expenditures. We ended Q3 with $228 million of adjusted cash and $370 million of debt. Our recent growth acceleration to 11% in paid worksite employees over last year was caused by our three primary drivers hitting on all cylinders, namely new client sales, client retention and net gain and employment within our client base. In addition to the strong net gain in employment in the client base, we saw an 18% improvement in paid worksite employees from sales of new accounts and a 16% improvement in fewer employees lost from client attrition over the same period last year. Booked sales of new accounts in the third quarter was excellent with approximately the same number of business performance advisors as last year selling 20% more clients and 30% more worksite employees than in the same period in 2020. A simple way to understand the impact of the maturity of the BPA team is to look at the number and percentage of trained BPAs with less than 18 months experience, 18 to 36 months experience, and those with greater than 36 months experience. Generally, the group in the middle with 18 to 36 months experience has approximately the average sales efficiency. Now, we've been growing the number of trained BPAs at an average rate of approximately 13% per year from 2016 through 2020, resulting in an increase in the total trained BPAs by 80%. This significant increase in the number of BPAs with greater than 36 months experience and the corresponding increase in overall sales efficiency, creates a new opportunity for us. In the past, we focused on growing at higher rates by continuing to grow the BPA team over 10% each year. The departure of that 6800 employee client in January is somewhat masking the excellent client retention for this year. We are forecasting Q4 average paid worksite employee growth of 11% to 12% over Q4 of 2020, a slight acceleration from the double-digit growth rate achieved in Q3. When combined with our outperformance in the three previous quarters, we are now forecasting full year worksite employee growth of about 7% above our previous guidance of 5.5% to 6.5%. We are forecasting a 19% to 48% increase in Q4 adjusted EBITDA to a range of $45 million to $56 million and a 24% to 65% increase in adjusted earnings per share to a range of $0.61 to $0.81. And when combining our Q4 earnings outlook with our outperformance over the previous three quarters, we now expect full year 2021 adjusted earnings per share to be in a range of $4.25 to $4.46 and adjusted EBITDA of $271 million to $282 million.

We achieved $0.89 in adjusted earnings per share and $60 million of adjusted EBITDA above the midpoint of our forecasted ranges and driven by the quick rebound to double-digit worksite employee growth from the pandemic lows experienced in the prior year. As per our growth metric, the average number of paid worksite employees increased by 11% over Q3 of 2020, above the high end of our forecasted range of 9.5% to 10.5%. Booked sales of new accounts in the third quarter was excellent with approximately the same number of business performance advisors as last year selling 20% more clients and 30% more worksite employees than in the same period in 2020. We are forecasting a 19% to 48% increase in Q4 adjusted EBITDA to a range of $45 million to $56 million and a 24% to 65% increase in adjusted earnings per share to a range of $0.61 to $0.81.

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Adjusted first quarter net income and earnings per share were $21 million and $0.33 per share respectively. Adjusted EBITDA for the first quarter was $62 million. We generated another $103 million of operating cash flow during the first quarter and increased our net cash position to more than $210 million. Consolidated revenue for the first quarter was $6 billion, an increase of $1.3 billion or 27% sequentially, but still well behind the pre-COVID revenue levels, which is principally driven by the year-over-year decline in volume in our aviation and marine segments when compared to 2020. Our aviation segment volume was 1.1 billion gallons in the first quarter, essentially flat sequentially, but still well below pre-COVID activity levels. In the U.S., we have been experiencing increased activity with TSA daily throughput back to nearly 65% of prepandemic levels. Volume in our marine segment for the first quarter was 4.2 million metric tons, flat sequentially and down 13% from the strong prior year results we generated where the new IMO 2020 regulations were implemented last January. Our land segment volume was 1.3 billion gallons or gallon equivalents during the first quarter, that's down 6% year-over-year, but up 2% sequentially, principally driven by increases in our World Connect natural gas operations as well as some seasonal improvement in the U.K. Land volumes have now rebounded to 97% of first quarter 2019 prepandemic levels. Consolidated volume in the first quarter was 3.6 billion gallons, up slightly on a sequential basis, but down year-over-year, again, related to the items already mentioned. Consolidated gross profit for the first quarter was $192 million. That's a decrease of 18% compared to the first quarter of 2020 with an increase of $26 million or 16% sequentially. Our aviation segment contributed $77 million of gross profit in the first quarter, down 15% year-over-year, but up 9% sequentially. The marine segment generated first quarter gross profit of $25 million, that's down 57% year-over-year, but up 12% sequentially. Our land segment delivered gross profit of $89 million in the first quarter, up 5% year-over-year when excluding the profitability related to the multi-service business from last year's results and actually up 24% sequentially. Core operating expenses, which excludes bad debt expense, were $146 million in the first quarter, down $29 million or 17% from the first quarter of last year. Looking ahead to the second quarter, operating expenses, excluding bad debt expense, should be generally in line with the first quarter in the range of $144 million to $148 million. We had debt expenses in the first quarter with $3.6 million, down both sequentially and year-over-year and down materially from the elevated levels in the second and third quarter of 2020. Adjusted income from operations for the first quarter was $42 million, down 38% from last year but up 68% sequentially related to the segment activity that I mentioned previously. Adjusted EBITDA was $62 million in the first quarter, down 29% from 2020 and up 39% sequentially. First quarter interest expense was $8.7 million, which is down 44% year-over-year and approximately 20% sequentially. At the end of the first quarter, we again had no borrowings outstanding under our revolver and ended the quarter in a net cash position in excess of $200 million. We expect interest expense in the second quarter to be approximately $9 million to $10 million. Our adjusted tax rate for the first quarter was 35.8% compared to 30.6% in the first quarter of 2020. Our total accounts receivable balance increased significantly on a sequential basis to approximately $1.7 billion at quarter end, principally related to the 37% rise in average fuel prices from the fourth quarter. We remain focused on managing working capital requirements, which resulted in operating cash flow generation of $103 million during the first quarter despite a significant sequential increase in accounts receivable. While we are appropriately inwardly focused over the first 12 months of the pandemic, during which time our team performed at a level of excellence for which they should all be very proud, we can now more clearly see the light at the end of the tunnel. This strong balance sheet, including $735 million of cash, provides us with capital to further grow our core business organically as well as the ability to capitalize on strategic investment opportunities which should drive scale and efficiencies, most specifically in our land and World Connect business activities. In demonstration of our commitment to enhancing shareholder value, over the past two years we've repurchased $134 million of our shares, and we increased our cash dividend twice, most recently, a 20% increase during the first quarter.

Adjusted first quarter net income and earnings per share were $21 million and $0.33 per share respectively. We expect interest expense in the second quarter to be approximately $9 million to $10 million.

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FoodTech revenue was $361 million, an increase of 19% year-over-year and 16% sequentially. The impact of foreign exchange translation was also a positive factor in the quarter, accounting for approximately 5 percentage points of the year-over-year growth which was 3 percentage points higher than expected. Adjusted EBITDA margin for the quarter was 19%, operating margins of 14.3% at the low end of our guidance range and negatively impacted by the cost pressures we experienced with the supply chain and labor market. AeroTech revenue of $115 million which was ahead 6% year-over-year and 8% sequentially was at the high end of our expectations. Adjusted EBITDA margins of 11.1% and operating margins of 10.5% exceeded guidance due to a favorable mix of higher recurring revenue. Interest expense came in nearly $1 million less than forecast due to better than expected cash flow. As a result, JBT reported diluted earnings per share from continuing operations of $0.95 in the second quarter. Adjusted earnings per share of $1.19 includes an adjustment for a $4.4 million or $0.14 per share non-cash deferred tax remeasurement associated with the tax law change in the UK. Adjusted EBITDA for the second quarter was $70.1 million up 2.58% year-over-year and 20% sequentially. Operating profit of $47.3 million declined 1% year-over-year and higher M&A costs also had [Phonetic] 25% sequentially. Free cash flow for the quarter remained strong at $35 million, representing a conversion rate of 115% with continued goods collections and accounts receivable, customer deposits and a slower than expected investment in inventory due to supply chain constraints. Additionally, we are increasing our capital expenditure forecast for the year by approximately $5 million from our previous guidance to support further strategic investment in our digital capabilities. Altogether, we expect free cash flow conversion for the year to remain north of 100%. We have again raised top line guidance for FoodTech, forecasting a year-over-year gain of 10% to 12% organically with another 2% increase related to FX translation, that compares with our previous guidance of 9% to 11%. With the inclusion of Prevenio acquisition, our all-in top line guidance for FoodTech is 14% to 16% growth in the full year. Considering the continuing supply chain and operational cost pressures, we have updated the margin guidance range for FoodTech with projected operating margins of 14% to 14.75% and adjusted EBITDA margin of 19% to 19.75%. At AeroTech, we have narrowed our revenue guidance range to 1% to 4% from the previously communicated range of 0% to 5%. We are holding margin guidance with projected operating margins of 10.75% to 11.25% and adjusted EBITDA margins of 12% to 12.5%. Additionally, we are adjusting our forecast for corporate costs as a percent of sales down slightly to 2.7% and lowering interest expense guidance to $9 million to $10 million. Altogether, we have raised our adjusted earnings per share guidance to $4.60 to $4.80 which excludes M&A and restructuring costs of $12 million to $14 million and the previously mentioned UK tax remeasurement in the second quarter. Our GAAP earnings per share guidance of $4.15 to $4.35 is $0.05 below our previous guidance and primarily due to higher M&A related costs. We've also raised our full year adjusted EBITDA guidance to $280 million to $290 million up from the previous guidance of $270 million to $285 million. Now focusing on the third quarter, we expect revenue growth for JBT of 18% to 19%. This consists of year-over-year growth of 19% to 20% at FoodTech, which includes 3% to 4% from acquisitions. For the AeroTech business, we are projecting growth of 15% to 16% for the quarter. At FoodTech, we are projecting third quarter operating margin of 14% to 14.5% with adjusted EBITDA margins of 19% to 19.5%. For AeroTech, operating margins are forecasted in 11.25% to 11.75% with adjusted EBITDA margin of 12.25% to 12.75%. Corporate costs for the quarter are expected to be $13 million to $14 million, excluding approximately $4 million in M&A and restructuring costs. Interest expense should be $2.5 million to $3 million. That brings third quarter 2021 earnings per share guidance to $1 to $1.10 on a GAAP basis and $1.10 to $1.20 as adjusted. With net proceeds of more than $350 million, we have locked in a portion of JBT's capital at a historically low fixed interest rate with favorable conversion terms that limit shareholder dilution until the stock exceeds the synthetic strike price of $240 per share. FoodTech orders expanded 3% sequentially from the first quarter's record level.

FoodTech revenue was $361 million, an increase of 19% year-over-year and 16% sequentially. As a result, JBT reported diluted earnings per share from continuing operations of $0.95 in the second quarter. Adjusted earnings per share of $1.19 includes an adjustment for a $4.4 million or $0.14 per share non-cash deferred tax remeasurement associated with the tax law change in the UK. We have again raised top line guidance for FoodTech, forecasting a year-over-year gain of 10% to 12% organically with another 2% increase related to FX translation, that compares with our previous guidance of 9% to 11%. Altogether, we have raised our adjusted earnings per share guidance to $4.60 to $4.80 which excludes M&A and restructuring costs of $12 million to $14 million and the previously mentioned UK tax remeasurement in the second quarter. Our GAAP earnings per share guidance of $4.15 to $4.35 is $0.05 below our previous guidance and primarily due to higher M&A related costs. That brings third quarter 2021 earnings per share guidance to $1 to $1.10 on a GAAP basis and $1.10 to $1.20 as adjusted.

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Sales in the fourth quarter were $123 million, up 7%, compared to the same period in 2019. Full-year sales were $424 million, compared to $469 million last year impacted by the pandemic in 2020. Today all of our plants are operational with varying levels of capacity from 85% to 100%. Fourth quarter gross margin was up 110 basis points to 34.7% from the same period last year. EBITDA margin of 21.4% was up from 20.3% in the fourth quarter of 2019. Fourth quarter adjusted earnings per share of $0.43, were up 16% from $0.37 in the fourth quarter of 2019. Full-year adjusted earnings per share of $1.12 were down from $1.45 last year. New business wins for the year were $442 million, down from the prior year as several OEMs push that sourcing decisions in 2020. Operating cash flow for 2020 was $77 million, up 19% and $64 million in 2019. In the fourth quarter, our sales increased to $123 million, up 8% sequentially and up 7% from last year. For full-year 2020 sales were down 10% from 2019, driven lower by the impact of the pandemic. We are still planning to deliver an annualized earnings per share improvement in excess of $0.22 by the second half of 2022. The annualized revenue is in the range of $6 million, the purchase price was slightly less than 2 times revenue. New business awards were $104 million for the quarter, we added six new customers in the quarter; four in transportation; one in medical and one in telecom. Total EV wins for the year were in the range of 20% of new business awarded. In Europe, we continue to leverage our footprint and capabilities in Denmark and the Czech Republic with Tier 1 defense customers and are currently in sample qualification. For the US light vehicle transportation market, volume is expected to improve in the 14 million to 16 million unit range. On-hand days of supply are now at 59 days. Approximately 9% below the five-year average of 65 days. We currently see reasonable control of inventory levels, European sales are forecasted in the 18 million to 19 million unit level, though there is some uncertainty given the recent lockdowns throughout the region with some OEMs announcing volume reductions. The Chinese market is expected to remain solid with volumes of 24 million to 26 million unit range this year. In terms of guidance for full-year 2021, we expect sales to be in the range of $430 million to $490 million, and adjusted earnings are expected to be in the range of $1.20 to $1.60. We expect to narrow the range as the year progresses. Our 2025 initiatives is focused on four key areas: 10% annualized profitable growth with active portfolio management; working more closely with our customers, building relationships and aligning our technology and product road maps; number three building the foundation of CTS's operating system to execute globally on a consistent basis, while we enhance our continuous improvement capabilities; and finally, advancing organizational capability to leadership and culture aligned to our customers' needs, our business performance, our core values, supporting our communities and environmental priorities. Fourth quarter sales were $123 million, up 7%, compared to last year and up 8% sequentially. Sales to transportation customers increased by 12% versus the fourth quarter of 2019, sequentially we were up 17% in sales to transportation customers. Our gross margin was 37% for the fourth quarter, up 230 basis points, compared to last quarter, and up 110 basis points, compared to last year. Adjusted EBITDA in the fourth quarter was 21.4%, up 240 basis points sequentially and up 110 basis points from last year. Fourth quarter 2020 earnings were $0.46 per diluted share, adjusted earnings per diluted share were $0.43, compared to $0.37 last year and $0.34 last quarter. For full-year 2020, sales were $424 million, down 10% from 2019. Sales to transportation customers declined 19% and sales to other end markets increased by 7%. Medical end market was soft, but sales down 7%. Our gross margin was 32.8% for the year, down from 33.6% last year. Our focus is to drive improvements and move toward the higher end of our target range of 34% to 37% gross margin. In the second half of 2020, we generated $0.05 of earnings per share and savings from our restructuring program announced in July 2020. Foreign currency rates impacted gross margin favorably in 2020 by approximately $3 million. Based on recent exchange rates currency could impact our 2021 gross margin unfavorably by approximately 100 basis points. SG&A and R&D expenses were $92.1 million or 21.7% of sales for the year. Our 2020 tax rate was 23.7%, we anticipate our 2021 tax rate to be in the range of 23% to 25%, excluding the discrete items. 2020 earnings were $1.06 per diluted share, adjusted earnings per diluted share were $1.12, compared to $1.45 last year. Our controllable working capital as a percentage of sales was 15.5% in the fourth quarter, improved slightly from the third quarter. Capex was $14.9 million for the full-year, down from $21.7 million in 2019. In 2021, we are expecting capex to be in the range of 4% to 4.5% of sales. Our operating cash flow in the quarter was $26 million, for the full-year operating cash flow was $77 million, compared to $64 million in 2019. The end of the year with $92 million in cash, compared to $100 million in December 2019. In the fourth quarter, we reduced our long-term debt balance to $55 million from $106 million at the end of the third quarter. Our debt to capitalization ratio was at 11.4% at the end of 2020, compared to 19.7% at the end of 2019. The combination of a strong balance sheet with a net cash position and access to over $240 million through our credit facility gives the flexibility to appropriately deploy capital toward our strategic objectives. We are progressing on our SAP implementation as we communicated earlier, more than 80% of our revenue comes from sites that are running on SAP.

Fourth quarter adjusted earnings per share of $0.43, were up 16% from $0.37 in the fourth quarter of 2019. In terms of guidance for full-year 2021, we expect sales to be in the range of $430 million to $490 million, and adjusted earnings are expected to be in the range of $1.20 to $1.60. We expect to narrow the range as the year progresses. Fourth quarter sales were $123 million, up 7%, compared to last year and up 8% sequentially. Fourth quarter 2020 earnings were $0.46 per diluted share, adjusted earnings per diluted share were $0.43, compared to $0.37 last year and $0.34 last quarter.

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In the second quarter, Chili's increased its two-year trend of taking share and leading the category with an 18% beat in sales and a 25% beat in traffic according to KNAPP-TRACK. The second-quarter fiscal 2021, Brinker delivered adjusted diluted earnings per share of $0.35. Brinker's total revenues were $761 million, and consolidated reported net comp sales were negative 12.1%. The brand's operating profit was $22 million below last year, constituting virtually all of the reduction in consolidated operating profit for Brinker. The impact on consolidated comp sales and restaurant operating margin were also outsized with the brand reporting net comp sales of negative 47% and a restaurant operating margin of 5.5%, down more than 11% from prior year. Operating income for the brand was relatively close to last year and only $1.6 million. Chili's reported net comp sales for the second quarter of negative 6.3%. This result does contain a holiday flip, which benefited the brand by approximately 100 basis points as Christmas moved out of Q2 and into Q3. Traffic gaps in the KNAPP index exceeded 20% throughout the quarter. Included in the consolidated adjusted net income for the quarter with a tax benefit of approximately $2.4 million, primarily driven by employment tax credits. Part of this benefit is a $1.8 million catch-up related to Q1, which was over accrued relative to our current expectations for our annual tax liability. The consolidated restaurant operating margin for the second quarter was 10.7%. Most of the variance to prior year is the result of the lower-than-normal contribution from Maggiano's, which impacted the consolidated margin by 130 basis points. A food and beverage expense was unfavorable year over year by 40 basis points primarily a result of menu mix, some higher costs from items such as cheese and produce. Labor costs were favorable 10 basis points with savings in hourly expenses, offset by deleverage. Restaurant expense was unfavorable year over year by 170 basis points, driven by top-line deleverage, increased delivery, and packaging, partially offset by lower advertising and restaurant maintenance expenses. Even with the volatile operating environment, Brinker has delivered solid cash flow, generating $130 million of operating cash flow year to date. After capital expenditures of $37 million, our free cash flow for the first six months totaled nearly $93 million. So far, during this fiscal year, we have retired over $66 million of revolving credit borrowings, and plan for further meaningful reductions as we progress through the second half of the year. As I've indicated during prior earnings calls, we are strengthening our balance sheet by deleveraging to below 3.5 times lease-adjusted debt, which we anticipate achieving next fiscal year. From a total liquidity perspective, we ended the quarter with $64 million of cash and total liquidity of just under $658 million. Underlying this performance is improvement in the net comp sales to a range of negative 5% to negative 6% for the last four weeks combined. 3 and 4 markets of California and Illinois. Factoring out these two markets, the rest of the brand during the last four weeks of the January period should record net comp sales of approximately positive 2%, again, clearly indicating the brand's ability to perform in a strong positive sales manner with dining rooms open.

The second-quarter fiscal 2021, Brinker delivered adjusted diluted earnings per share of $0.35. Brinker's total revenues were $761 million, and consolidated reported net comp sales were negative 12.1%. Chili's reported net comp sales for the second quarter of negative 6.3%. Restaurant expense was unfavorable year over year by 170 basis points, driven by top-line deleverage, increased delivery, and packaging, partially offset by lower advertising and restaurant maintenance expenses.

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The first was our purchase of the Stagecoach natural gas storage and pipeline assets in the Northeast for approximately $1.2 billion. Our second acquisition is to make an attractive platform investment in the rapidly growing renewable natural gas market by purchasing Kinetrex for approximately $300 million. Both of these acquisitions meet our hurdle rates that I referred to earlier, and both are being paid for with our internally generated cash. On the Stagecoach, storage and transportation assets drew $1.2 billion. It adds 41 Bcf of certificated and pretty flexible working gas storage capacity and 185 miles of pipeline. The second transaction, which we announced at the end of last week, was accomplished by our newly formed Energy Transition Ventures Group. At signing, Kinetrex had secured three new signed development projects that we will build out over the next 18 months, resulting in a purchase price plus capital at a less than six times EBITDA multiple by the time we get to 2023. First, I'm going to start with our business fundamentals, and then I'll talk very high level about our forecast for the full year. Transport volumes were up 4% or approximately 1.5 dekatherms per day versus the second quarter of 2020. Physical deliveries to LNG off of our pipeline averaged approximately 5 million dekatherms per day. LNG volumes also increased versus the first quarter of this year by approximately 8%. Our market share of LNG export volumes is about 48%. Exports to Mexico were up about 20% versus the second quarter of 2020. Our share of Mexico volumes is about 54%. Deliveries to LDCs were down slightly, while deliveries to industrial facilities were up 4%. Our natural gas gathering volumes were down about 12% in the quarter compared to the second quarter of '20. So compared to the first quarter of this year, volumes were up about 6%. And here, we saw nice increases in Hiland volumes, which were up about 10%, and the Haynesville volumes, reports were up about 13%. In our products pipeline segment, refined products were up 37% for the quarter versus the second quarter of '20. Volumes are also up about 17% versus the first quarter of this year. Compared to the pre-pandemic levels, and we're using the second quarter of 2019 as the reference point, road fuels, and that's gasoline and diesel combined, are essentially flat, and jet fuel is still down about 26%. Crude and condensate volumes were up 6% in the quarter versus the second quarter of '20, and sequentially, they were up very slightly. If you exclude the tanks out of service or required inspections, approximately 98% of our tanks are leased. Most of the revenue that we receive comes from fixed monthly charges we receive for tanks under lease, but we do receive a marginal amount of revenue from throughput, and we saw throughput increase significantly, about 22% in total on our liquids terminals, 26% if you're just looking at refined products. But that still remains a little bit below 2019, up 6% on total liquids volumes, 5% when you're just looking at gasoline and diesel. On the bulk side, volumes increased by 23%, and that was driven by coal and steel. In the CO2 segment, crude volumes were down about 9%. CO2 volumes were down about 10% year over year. But if you compare to our budget, we're currently anticipating the oil volumes will exceed our budget by approximately 5%, and that's driven primarily by some nice performance on SACROC. As we said in the release, we're currently projecting full-year DCF of $5.4 billion. That's above the high end of the range that we gave you last quarter. The range we gave you last quarter was $5.1 billion to $5.3 billion. For the second quarter of 2021, we're declaring a dividend of $0.27 per share, which is $1.08 annualized, and that's up 3% from the second quarter of 2020. This quarter, we generated revenue of 3.15 billion, which is up 590 million from the second quarter of 2020. We also had higher cost of sales with an increase there of 495 million. So netting those two together, gross margin was up 95 million. This quarter, we also took an impairment of our South Texas gathering and processing assets of 1.6 billion. So with that impact, we generated a loss -- net loss of 757 million for the quarter. Looking at adjusted earnings, which is before certain items, primarily the South Texas asset impairment this quarter and the midstream goodwill impairment a year ago, we generated income of $516 million this quarter, up $135 million from the second quarter of 2020. Natural gas -- our natural gas segment was up $48 million for the quarter, and that was up primarily due to favorable margins in our Texas Intrastate business, greater contributions from our PHP asset, which is now in service; and increased volumes on our Bakken gas gathering systems. Our product segment was up $66 million driven by a nice recovery in refined product volume. Terminals was up 17 million, also driven by the nice refined product volume recovery, partially offset by lower utilization of our Jones Act tankers. Our CO2 segment was down $5 million due to lower crude oil and CO2 volumes and some increased well work costs. Our G&A and corporate charges were lower by $7 million. Our JV DD&A category was lower by $27 million primarily due to Ruby. And that brings us to our adjusted EBITDA of $1.670 billion, which is 7% higher than the second quarter of 2020. Interest expense was $16 million favorable, driven by our lower LIBOR rates benefiting our interest rate swaps, as well as a lower debt balance and lower rates on our long-term debt. Our cash taxes for the quarter were unfavorable $40 million, mostly due to Citrus, our products Southeast pipeline and Texas margin tax deferrals, which were taken in 2020 as a result of the pandemic, just timing. Our sustaining capital was unfavorable $51 million for the quarter driven by higher spend in our natural gas, CO2 and Terminals segments, but that higher spend is in line with what we had budgeted for the quarter. Our total DCF of $1.025 billion is up 2%, and our DCF per share of $0.45 per share is up $0.01 from last year. On our balance sheet, we ended the quarter at 3.8 times debt-to-EBITDA, which is down nicely from 4.6 times at year-end. For debt-to-EBITDA, we expect to end the year at 4.0 times. The net debt for the quarter ended at 30 billion, almost 30.2 billion, down 1.847 billion from year-end and about $500 million down from Q1. Our net debt has now declined by over $12 billion or about 30% since our peak levels. To reconcile the change in the quarter in net debt, we generated 1.025 billion of DCF. We paid out approximately 600 million of dividends. We spent approximately $100 million of growth capital and contributions to our joint ventures. And we had $175 million of working capital source of cash flows, primarily interest expense accrual. For the change year-to-date, we generated $3.354 billion of distributable cash flow. We spent $1.2 billion on dividends. We've spent $300 million on growth capex and JV contributions. We received $413 million on our partial interest sale of NGPL. And we have experienced a working capital use of approximately $425 million, and that explains the majority of the change for the year.

Both of these acquisitions meet our hurdle rates that I referred to earlier, and both are being paid for with our internally generated cash. The second transaction, which we announced at the end of last week, was accomplished by our newly formed Energy Transition Ventures Group. First, I'm going to start with our business fundamentals, and then I'll talk very high level about our forecast for the full year. Transport volumes were up 4% or approximately 1.5 dekatherms per day versus the second quarter of 2020. As we said in the release, we're currently projecting full-year DCF of $5.4 billion. That's above the high end of the range that we gave you last quarter. For the second quarter of 2021, we're declaring a dividend of $0.27 per share, which is $1.08 annualized, and that's up 3% from the second quarter of 2020. For debt-to-EBITDA, we expect to end the year at 4.0 times.

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The result was a strong finish, growing revenue 300% in the quarter and serving more clients than last tax season. In total, our digitally enabled returns grew over 150%. Online growth was 10.6%, which led the total DIY return growth of 8% as we held share in the category when excluding stimulus returns. We believe there are between seven million to eight million returns with $1 of income and are being tracked as stimulus filers. Instead, we saw just a 40 basis point decline in assisted e-files and a moderate change in mix between assisted and DIY when excluding the estimated number of onetime stimulus filings. In fact, during the pandemic from mid-March through mid-July, assisted filings actually increased 50 basis points, which is telling considering the circumstances. for the third consecutive year with a 3.3% increase in returns. This was led by continued strength in our DIY business with a 10.6% increase in online filings. Our finish to the tax season was strong, however, resulting in a decline in returns of just 2.8% and a small share loss. Following a couple of months of flat year-over-year revenue, I'm pleased to report that we've seen progressively better results in the subsequent months, resulting in year-over-year growth of nearly 20% during the quarter. The increase in tax filing volume in Wave's contribution resulted in revenue of $601 million in the fiscal first quarter, an increase of $451 million or 300% compared to the prior year. These increases were partially offset by other expense reductions, resulting in an overall increase in operating expenses of just 30% to $448 million. Interest expense increased $11 million as a result of our line of credit being fully drawn, which I'll discuss later. The net result of revenues increasing at a greater rate than expenses was pre-tax income from continuing operations of $124 million compared to last year's pre-tax loss of $207 million, which is typical for our fiscal first quarter. GAAP earnings per share improved to $0.48 compared to a prior year loss of $0.72, while non-GAAP earnings per share improved to $0.55 compared to a loss of $0.66. Given the strong finish to the tax season, we had a cash position of $2.6 billion at the end of the quarter, and as such, intend to pay down the full balance of the draw later this month. I'm pleased with our successful issuance of $650 million of 10-year notes at a coupon of 3.875%. We have continued our streak of paying quarterly dividends consecutively since going public nearly 60 years ago. And while we cannot guarantee future dividend payments with the level of dividend would be at that time, we do have a goal of increasing the dividend over the long term as evidenced by the 30% increase over the past five years. From a financial perspective, we expect this agreement to result in savings of $25 million to $30 million on a run rate basis. Though that number will be approximately $10 million lower in fiscal '21 as we are transitioning midyear and will incur some onetime expenses.

The increase in tax filing volume in Wave's contribution resulted in revenue of $601 million in the fiscal first quarter, an increase of $451 million or 300% compared to the prior year. GAAP earnings per share improved to $0.48 compared to a prior year loss of $0.72, while non-GAAP earnings per share improved to $0.55 compared to a loss of $0.66.

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Our first quarter results put us on track to achieve our 2021 guidance and 7% to 9% average annual growth through 2025. Two, launched the first 24/7 product for carbon-free energy on an hourly basis; three, further unlock the value of our technology platforms; four, continue to improve our ESG positioning through the transformation of our portfolio; and five, monetize excess LNG capacity in Central America and Caribbean. This year, we are increasing that goal by 60% to a target of four gigawatts. Today, I am pleased to report that year-to-date, we've already signed 1.1 gigawatts including a landmark deal with Google. As you can see on Slide six, we have a backlog of 6.9 gigawatts of renewables, consisting of projects already under construction or under signed power purchase agreements, or PPAs. This equates to 20% growth in our total installed capacity and a 60% increase in our renewables capacity. We continue to increase our pipeline of projects to support our growth and now have a global pipeline of more than 30 gigawatts of renewable projects, roughly half of which is in the United States. Our second key goal for this year is to launch the first 24/7 energy product that matches a customer's load with carbon-free energy on an hourly basis. To that end, earlier this week, we announced a landmark, first of its kind agreement to supply Google's Virginia-based data centers with 24/7 carbon-free energy sourced from a portfolio of 500 megawatts of renewables. Under this innovative structure, AES will become the sole supplier of the data center's energy needs, ensuring that the energy supplied will meet carbon-free targets when measured on an hourly basis for the next 10 years. This agreement sets a new standard in carbon-free energy for commercial and industrial customers who signed 23 gigawatts of PPAs in 2020. As we discussed at our Investor Day, the almost 300 companies that make up the RE100 will need more than 100 gigawatts of new renewables by 2030. This transaction with Google demonstrates that a higher sustainability standard is possible, and we expect a substantial portion of customers to pursue 24/7 carbon-free objectives. One of these platforms is Uplight, an energy efficiency software company that works directly with the utility and has access to more than 100 million households and businesses in the U.S. Uplight is at the forefront of the shift to low-carbon and digital solutions on the cloud. In March, we announced a capital raise with a consortium led by Schneider Electric, valuing Uplight at $1.5 billion. This dynamic industry is expected to grow 40% annually, and Fluence is well positioned to capitalize on this immense opportunity through its distinctive competitive advantages, including its AI-enabled bidding engine. This technology doubled the energy density and cuts construction time by 2/3. Over the past five years, we have announced the retirement or sale of 10.7 gigawatts of coal, or 70% of our coal capacity, one of the largest reductions in our spectrum. We recognize that we have more work to do and have set a goal of reducing our generation from coal to less than 10% of total generation by 2025. Furthermore, we expect to achieve net-zero emissions from electricity by 2040, one of the most ambitious goals of any power company. Last month, we reached an agreement to provide terminal services for an additional 34 tera BTUs of LNG throughput under a 20-year take-or-pay contract. This will bring our total contracted terminal capacity in Panama and the Dominican Republic to almost 80%. There are 45 tera BTUs of available capacity remaining, which we expect to sign in the next couple of years. As you can see on Slide 16, adjusted pre-tax contribution, or PTC, was $247 million for the quarter, which was very much in line with our expectations and similar to last year's performance. Adjusted earnings per share for the quarter was $0.28 versus $0.29 last year. With adjusted PTC essentially flat, the $0.01 decrease in adjusted earnings per share was the result of a slightly higher effective tax rate this quarter. In the U.S., in utilities, strategic business unit, or SBU, PTC was down $27 million, driven primarily by a lower contribution from our legacy units at Southland and higher spend in our clean energy business as we accelerate our development pipeline given the growing market opportunities. At our South America SBU, PTC was down $31 million, mostly driven by lower contributions from AES and is formerly known as AES Gener, due to higher interest expense and lower equity earnings from the Guacolda plant in Chile. With our first quarter results, we are on track to achieve our full year 2021 adjusted earnings per share guidance range of $1.50 to $1.58. Our typical quarterly earnings is more back-end weighted with roughly 40% of the earnings occurring in the first half of the year and the remaining in the second half. Growth in the year to go will be primarily driven by contributions from new businesses, including a full year of operations of the Southland repowering project, 2.3 gigawatts of projects in our backlog coming online during the next nine months, reduced interest expense, the benefit from cost savings and demand normalization to pre-COVID levels. We are also reaffirming our expected 7% to 9% average annual growth target through 2025. Consistent with the discussion at our Investor Day, sources reflect approximately $2 billion of total discretionary cash, including $800 million of parent free cash flow and $100 million of proceeds from the sale of Itabo in the Dominican Republic, which just closed in April. Sources also include the successful issuance of the $1 billion of equity units in March, eliminating the need for any additional equity raise to fund our current growth plan through 2025. We'll be returning $450 million to shareholders this year. This consists of our common share dividend, including the 5% increase we announced in December and the coupon of the equity units. And we plan to invest approximately $1.4 billion to $1.5 billion in our subsidiaries as we capitalize on attractive growth opportunities. Approximately 60% of the investments are in global renewals, reflecting our success in renewables origination during 2020 and our expectations for 2021. About 25% of these investments are in our U.S. utilities to fund rate base growth with a continued focus on grid and fleet modernization. In the first quarter, we invested approximately $450 million in renewables, which is roughly 1/3 of our expected investment for the year. In summary, 85% of our investments are going to the U.S. utilities and global renewables, helping us to achieve our goal of increasing the proportion of earnings from the U.S. to more than half and from carbon-free businesses to about 2/3 by 2025. The remaining 15% of our investment will go toward green LNG and other innovative opportunities that support and accelerate the energy transition.

Our first quarter results put us on track to achieve our 2021 guidance and 7% to 9% average annual growth through 2025. Adjusted earnings per share for the quarter was $0.28 versus $0.29 last year. We are also reaffirming our expected 7% to 9% average annual growth target through 2025.

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The totality of these actions was a positive impact of $55 million to our operating income in 2020. We increased free cash flow over 2019 levels by 14%, and we strengthened our balance sheet by paying down debt, putting the company on solid footing as the pandemic subsides. We invested 50% more than 2019 in capital spending to fund growth and productivity. As I previously mentioned, employee safety is our #1 priority. In 2020, we delivered over 100,000 training sessions, both online and through virtual Lunch & Learn meetings. This represented a 70% increase in training sessions over 2019. From a macro perspective, GDP forecasts in all our major regions are expected to grow from 2020's depressed levels, with most of our key countries expanding at 3% or higher. And the LIRA index is anticipating the growth rate of homeowner spend on repair and replacement projects to continue into 2021, with spending increasing approximately 4%. The AIA recently released its semiannual Consensus Construction Outlook, which expects new non-resi construction spend in the US to decrease by about 6% in 2021. Also, AGC recently released survey results based on over 1,300 contractors that concluded 2021 will be a very difficult year for many construction firms in their markets. China is forecasted to grow over 8% in 2021. Finally, Middle East GDP is expected to grow in the 3% range, so a little slower than other regions and likely being more influenced by adverse geopolitical issues and energy demand. With these added resources, we have more than 85 people working exclusively on Smart & Connected products globally, a 55% increase in resources over 2019. Cumulatively, we have exceeded 70,000 connected devices shipped since we started selling Smart & Connected products. We're still focused on achieving our goal of 25% Smart & Connected product sales by 2023. Sales approximate $4 million annually. Reported sales of $403 million were up 1% year-over-year. Organic sales were down 2%, but were more than offset by net acquired sales and a foreign exchange tailwind. Acquired sales, net of divestiture, approximated $1 million in the quarter. Adjusted operating profit of $55 million, a 10% increase, translated into an adjusted operating margin of 13.6%, up 110 basis points versus last year. Investments totaled $3 million in the quarter. Adjusted earnings per share of $1.15 increased 15% versus last year. EPS growth was driven by $0.08 from operations and $0.07 primarily from a lower adjusted effective tax rate and positive foreign currency translation. The adjusted effective tax rate in the quarter was 24.6%. GAAP reporting included a net tax charge of $9.7 million or $0.29 a share, primarily driven by increased income tax expense resulting from recently issued final tax regulations which reduced the realizability of foreign tax credits. In the Americas, reported sales decreased by approximately 1% to $264 million. Organically, sales were down by approximately 2%, with growth in certain plumbing and electronic products being more than offset by reductions in heating and hot water, water quality, drains, and HVAC product sales. Together, positive foreign exchange movements in the Canadian dollar and the TDG acquisition added 1% to sales year-over-year. Americas adjusted operating profit for the quarter increased 1% to $46 million. Adjusted operating margin expanded 40 basis points to 17.4%. We made approximately $2 million more in investments than the previous year. Turning to Europe, sales of $120 million were up 6% on a reported basis, driven mainly by a stronger euro as foreign exchange increased sales by 8% year-over-year. Organically, sales were down 2%, which was better than we had expected. Adjusted operating profit in Europe was approximately $17 million, a 25% increase over last year. Adjusted operating margin of 14% increased 220 basis points, primarily due to cost actions and productivity, including restructuring savings which more than offset lower volume and investments. Sales approximated $19 million, up 1% on a reported basis, with favorable foreign exchange movements of 5% probably in China and net acquired sales growth of 4%, more than offsetting an organic decline of 8%. Adjusted operating profit of $3.4 million was up 13% versus last year with adjusted operating margin up 170 basis points driven by cost controls, productivity and high intercompany volume, partially offset by lower third-party volume and investments. For 2020, reported sales were $1.5 billion, down 6% on a reported basis. The decrease was primarily driven by an organic sales decline of 7%, attributable to the effect of COVID-19. Foreign exchange and acquisitions had a 1% positive effect on sales year-over-year. Adjusted operating margin was 12.9% in 2020, flat with 2019 and a good result factoring in lower volume. A decremental decline in adjusted operating profit was 13% for the year. We were able to mitigate the impact of the volume decline through aggressive cost actions which totaled $55 million in 2020. It is important to note that we maintained our adjusted operating margin while still funding incremental investments of roughly $9 million during the year. Adjusted full year earnings per share of $3.88 declined 5% versus the prior year. Free cash flow for the full year was $187 million, an increase of 14% over 2019 driven by better working capital management, especially in accounts receivable. Free cash flow conversion was 164%. We increased free cash flow while still investing 50% more in key projects over 2019. In total, we invested $44 million in 2020, which equates to 140% reinvestment ratio. In 2020, we returned $60 million to shareholders in the form of dividends and share repurchases, an 18% increase over 2019. During 2020, we also paid down debt by $110 million. Our net debt to capitalization ratio is now negative at 2% at yearend as compared to a positive 8.4% in the prior year. We presently believe that this air pocket will impact us starting in the second quarter of 2021. Of the $55 million of cost actions we took in 2020, we expect that approximately $15 million of these costs will return in 2021. We estimate that organically, Americas sales may range from down 5% to flat in 2021. Sales should increase by about $4 million with the addition of the TDG acquisition. For Europe, we are also forecasting organic sales to be down 5% to flat. In APMEA, we expect organic sales may grow from 2% to 6% for the year. Sales should also increase by approximately $6 million from the AVG acquisition. Overall, on a consolidated basis, we anticipate Watts organic sales to range from down 5% to flat in 2021. We estimate our adjusted operating margins may be down 50 to 90 basis points. This is primarily driven by the 2021 time/cost headwinds of $15 million, decremental lower volume, incremental investments of $13 million, and general cost inflation, which are being partially offset by $14 million of incremental restructuring savings, along with price and productivity actions. We expect corporate costs to be about $40 million for the year. Interest expense should be roughly $10 million. Our adjusted effective tax rate for 2021 should approximate 27%. Capital spending is expected to be in the $40 million range as we will continue to reinvest in our manufacturing facilities, systems and new product development, which will support future growth and productivity. Depreciation and amortization should be approximately $46 million for the year. We expect to continue to drive free cash flow conversion equal to or greater than 100% of net income. We are assuming a 1.22 euro-US dollar foreign exchange rate for the full year versus the average rate of 1.12 in 2020. Please recall that for every $0.01 movement up or down in the euro-dollar exchange rate, our European annual sales are impacted by approximately $4 million, and our annual earnings per share is impacted by $0.01. We expect our share count should approximate $34 million for the year. For Q1 organically, we see sales down 3% to up 1%, with Americas and Europe sales slightly negative and APMEA likely experiencing organic growth in line with the full year range due to easier comps from Q1 COVID impact last year. Acquired sales should approximate $2.5 million in Q1, $1 million in the Americas and $1.5 million in APMEA. We expect incremental investments of $2 million to $3 million in Q1. The investments will be offset by about $5 million of incremental restructuring savings. The adjusted effective tax rate should approximate 26%.

Reported sales of $403 million were up 1% year-over-year. Adjusted earnings per share of $1.15 increased 15% versus last year. We presently believe that this air pocket will impact us starting in the second quarter of 2021.

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In Q4, we reported revenues of approximately $1.5 billion for the quarter. This represents a 9.9% decline versus last year and a considerable sequential improvement when comparing to our more than 15% decline in Q3. Our Technology & Manufacturing industry group grew almost 7% and Business & Industry as well as Education posted revenue results that were only slightly down. Income from continued operations grew to $53.1 million or $0.78 per share. On an adjusted basis, we delivered $46.7 million or $0.69 per share. Adjusted EBITDA margin rose to 6.2% versus 5.6% last year. This had 120 basis point impact on our adjusted EBITDA margin as well as our earnings. As a company that's been around for more than 110 years, ABM has withstood and grown during many global events. As an example, our approach to collections led us to generate more than $450 million in cash flow from operations and $420 million in free cash flow, both records for the firm. This translates to nearly $1 billion of liquidity, including $400 million of cash, which is an extremely powerful position to be in during still uncertain times. Earl is a seasoned finance executive joining us from Best Buy, a leading Fortune 500 provider of consumer technology products and services with 125,000 employees in North America. Since Sean's arrival in ABM in 2017, we've broken sales records each succeeding year and we achieved another record in 2020 with new sales at $1.2 billion, an amazing accomplishment for any year but especially in a year when so much of the economy was paused. On that front, from a payback standpoint, we concluded the year with over $300 million in sales for our EnhancedClean program and COVID-related activities. For the first quarter, we expect GAAP earnings per share of $0.53 to $0.58 in earnings per diluted share or adjusted earnings per share of $0.60 to $0.65 per diluted share. These ranges compare to last year's $0.41 and $0.39 respectively, both considerable increases on a year-over-year basis. We also expect adjusted EBITDA margin in the range of 6.1% to 6.4%, expanding from 4.3% last year. We not only exceeded our pre-COVID expectations, but actually accelerated into a long-term EBITDA margin range of 5.5% to 6%. Revenue for the quarter were $1.5 billion, a total decrease of approximately 9.9% compared to last year, reflecting our second full quarter of COVID-19 revenue declines, particularly in the Aviation and Technical Solutions segment. GAAP income from continuing operations was $53.1 million or $0.78 per diluted share compared to $48.1 million or $0.71 last year. We saw a benefit of $21.3 million in self-insurance adjustments, of which $6.2 million was related to the current year. On an adjusted basis, income from continued operations for the quarter increased to $46.7 million or $0.69 per diluted share compared to $44.7 million or $0.66 last year. Partially offsetting these results was a $17.6 million reserve for notes receivables for a project related to a unique family entertainment customer within the Technical Solutions segment. This amount was approximately $10 million for the quarter. On a year-over-year basis, the fourth quarter also experienced one less workday which equates to approximately $6 million in labor expense savings. But the number of days in the fourth quarter of fiscal 2021 will be comparable at 65 days. Our overall performance during the quarter led to adjusted EBITDA of approximately $92.5 million at a margin rate of 6.2% compared to $93 million or 5.6% last year. B&I revenues were $794.3 million, down just 1.6%. We're encouraged by the sequential top line improvement compared to a decline of 6.3% last quarter. This led to a more favourable mix of B&I business that led to operating profit growth of more than 65% to $84.7 million with a margin rate of 10.7%. Revenues were $245.5 million for the quarter, up 6.7% versus last year. Operating profit grew more than 30% to $23.5 million for an operating margin of 9.6%. In education, we reported revenue of $212.2 million, reflecting the new school season and the adoption of hybrid models across our K-12 and higher education portfolios. Operating profit of $15.1 million or 7.1% margin reflects labor-related savings as a result of modified staffing at site locations during the pandemic. Aviation reported revenues of $141 million, and an operating profit of $3.5 million, clearly demonstrating how the pandemic continues to have a dramatic impact on the industry. And now onto Technical Solutions, which reported revenues of $123.1 million compared to $175.5 million last year. As a reminder, this segment experienced phenomenal growth last year, exceeding 25% during Q4 of fiscal '19. Backlog remains in our healthy zone, which we've historically defined as above the $150 million. The operating loss of $3.6 million was driven by a reserve of notes receivables related to a single entertainment customer and associated with the client increasing credit risk resulting from the pandemic, which we continue to pursue. During the quarter, we generated a record $198.7 million in cash flow from operations and free cash flow of $189.6 million for the quarter. This led to $457.5 million in cash flow and $419.5 million of free cash flow for the year. As a reminder, these results include $101 million in deferred U.S. payroll taxes as a result of the CARES Act, which will be due in 2021 and 2022. Due to our strong cash position, we ended the quarter with total debt, including standby letters of credit of $883.4 million and a bank adjusted leverage ratio of 2.1 times. Additionally, we ended the quarter with cash and cash equivalents of $394.2 million. During the quarter, we paid our 218th consecutive quarterly cash dividend for a total distribution of approximately $12.3 million. Total revenues were approximately $6 billion, a decrease of 7.9% versus last year. Our GAAP income from continuing operations for fiscal 2020 was $0.2 million. On an adjusted basis, income from continuing operations for the year was $163.5 million or $2.43 per diluted share. Adjusted EBITDA for the year increased 6.6% to $361.9 million and we ended the fiscal year with an adjusted EBITDA margin of 6%. At this time, we expect GAAP earnings per share to be in a range of $0.53 to $0.58 and adjusted earnings per share to be in a range of $0.60 to $0.65. Adjusted EBITDA margin is anticipated to be between 6.1% to 6.4%. And as Scott discussed extensively, we are planning to invest in fiscal 2021. The first quarter will see the same level of investments that we saw during the fourth quarter of fiscal 2020 of approximately $10 million. The first quarter will also have one less working day versus last year, which could lead to approximately $6 million in lower labor expense. The tax rate for the quarter is anticipated to be approximately 30%. This rate excludes discrete tax items such as the work opportunity tax credit and a tax impact of stock-based compensation awards, the total impact of which we currently expect will be under $1 million in Q1. Lastly, related to taxes, in fiscal '20, our full-year impact for the Work Opportunity Tax Credit was $4 million, reflecting the pandemic's impact on traditional hiring practices.

In Q4, we reported revenues of approximately $1.5 billion for the quarter. Income from continued operations grew to $53.1 million or $0.78 per share. On an adjusted basis, we delivered $46.7 million or $0.69 per share. For the first quarter, we expect GAAP earnings per share of $0.53 to $0.58 in earnings per diluted share or adjusted earnings per share of $0.60 to $0.65 per diluted share. GAAP income from continuing operations was $53.1 million or $0.78 per diluted share compared to $48.1 million or $0.71 last year. On an adjusted basis, income from continued operations for the quarter increased to $46.7 million or $0.69 per diluted share compared to $44.7 million or $0.66 last year. At this time, we expect GAAP earnings per share to be in a range of $0.53 to $0.58 and adjusted earnings per share to be in a range of $0.60 to $0.65. And as Scott discussed extensively, we are planning to invest in fiscal 2021.

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Yesterday, we reported fourth quarter 2019 net income of $136 million or $1.43 per share. Fourth quarter net income included special items of $26 million primarily for certain costs associated with the company's November 2019 debt refinancing, which included redemption premiums, financing fees and write-offs for unamortized debt issuance costs and treasury lock balances. Excluding the special items, fourth quarter 2019 net income was $163 million or $1.71 per share compared to the fourth quarter 2018 net income of $205 million or $2.17 per share. Fourth quarter net sales were $1.7 billion in both 2019 and 2018. Total company EBITDA for the fourth quarter, excluding special items, was $335 million in 2019 and $387 million in 2018. We also reported full year 2019 earnings excluding special items of $726 million or $7.65 per share compared to 2018 earnings, excluding special items of $760 million or $8.03 per share. Net sales were $7 billion in both 2019 and 2018. Excluding the special items, total company EBITDA in 2019 was $1.450 billion compared to $1.500 billion in 2018. Excluding the special items, the $0.46 per share decrease in fourth quarter 2019 earnings compared to the fourth quarter of 2018 was driven primarily by lower prices and mix in our Packaging business segment of $0.57 and the Paper segment $0.02, higher operating costs $0.05, primarily due to inflation related increases with chemicals, labor and benefits expenses, repair and material costs and other outside service costs. We also had higher non-operating pension expense of $0.02, higher depreciation expense of $0.01 and other costs including start-up related costs at our new Richland, Washington plant of $0.03. These items were partially offset by higher volumes in our Packaging segment of $0.16 and Paper segment $0.01, lower annual outage expenses $0.04 and lower freight and logistics expenses of $0.03. Looking at our Packaging business, EBITDA excluding special items in the fourth quarter 2019 of $303 million with sales of $1.5 billion, resulted in a margin of 21% versus last year's EBITDA of $352 million and sales of $1.5 billion or a 23% margin. This gives us the capability to further optimize the mix in the inventory levels of the entire containerboard system and provide the type and the quality a board needs for our customers on the West Coast and on the Pacific Northwest and reduce our systemwide freight and logistics costs, which in the fourth quarter alone provided over $2 million of benefit. For the full year 2019, Packaging segment EBITDA excluding special items was $1.3 billion with sales of $5.3 billion or a 22.1% margin compared to full year 2018 EBITDA of $1.4 billion with sales of $5.9 billion or 23.6% margin. As Mark indicated, in corrugated products, we had an all-time record quarterly box shipments per day which were up 0.7% compared to last year's fourth quarter as well as a record fourth quarter total shipments, which were up 2.3% over last year. Outside sales volume of containerboard was 6% below last year's fourth quarter while up 3.7% compared to the third quarter of 2019 due to higher export volume. For the full year 2019, we established new annual records for total box shipments and box shipments per day, both up 0.9% versus 2018. Domestic containerboard and corrugated products prices and mix together were $0.43 per share lower than the fourth quarter of 2018 and down $0.14 per share versus the third quarter of 2019 due to a less rich mix. Export containerboard prices were $0.14 per share, below fourth quarter 2018 levels and down $0.02 per share compared to the third quarter of 2019. Looking at the Paper segment, EBITDA excluding special items in the fourth quarter was $53 million with sales of $244 million or a 22% margin compared to the fourth quarter of 2018 EBITDA of $52 million and sales of $227 million or 23% margin. We did a good job managing our inventories during the quarter as we ran the system to demand and reduced our office paper inventories by almost 10% versus the third quarter of 2019. For the full year 2019, Paper segment EBITDA excluding special items was $213 million and sales were $964 million or 22% margin compared to full year 2000 [Phonetic] EBITDA of $165 million with sales of $1 billion or 16% margin. We had very good cash generation in the fourth quarter with cash provided by operations of $329 million and free cash flow of $194 million. The primary uses of cash during the quarter included capital expenditures of $136 million, common stock dividends totaled $75 million, $31 million for redemption premiums and fees associated with our debt refinancing, $34 million for federal and state income tax payments, pension payments of $4 million and net interest payments of $35 million. In addition, in order to generate higher interest income for a portion of our cash, $146 million moved from cash to marketable securities on our balance sheet during the quarter. We ended the quarter with $679 million of cash on hand or $825 million if you include the marketable securities. During the quarter we refinanced $900 million of our existing 2.45% notes maturing in 2020 and 3.9% notes maturing in 2022 with new 10-year and-30-year notes. This resulted in only a marginal increase in the company's average cash interest rate of just over a 0.1% and extended the company's overall debt maturity from 4.1 years to 10.3 years. Gross debt remain unchanged at $2.5 billion. For the full year 2019, cash from operations was a record $1.2 billion. Capital spending was $399 million and free cash flow was a record $808 million. Our final effective tax rate for 2019 was 24% and our final cash tax rate was 19%. Regarding full-year estimates of certain key items for the upcoming year, we expect total capital expenditures to be between $400 million to $425 million. DD&A is expected to be approximately $400 million, pension and post-retirement benefit expense of $22 million, and we expect to make cash pension and post-retirement benefit plan contributions of $85 million. Our full year interest expense in 2020 is expected to be approximately $81 million and net cash interest payments should be about $84 million. The estimate for our 2020 combined federal and state cash tax rate is approximately 19% and for our book effective tax rate of approximately 25%. This will have a negative impact on earnings per share of approximately $0.09 moving from the fourth quarter of 2019 to the first quarter of 2020, and $0.06 per share versus the first quarter of 2019. The total earnings impact of these outages including lost volume, direct costs and amortized repair costs is expected to be $0.81 per share compared to $0.60 per share for 2019. The current estimated impact by quarter in 2020 is $0.24 per share in the first quarter, $0.17 in the second, $0.13 in the third quarter and $0.27 per share in the fourth quarter. We also expect lower export prices. Containerboard volumes will be lower due to scheduled outages at our three largest mills during the quarter, but we do expect higher corrugated product shipments. Considering these items, we expect first quarter earnings of $1.20 per share.

Yesterday, we reported fourth quarter 2019 net income of $136 million or $1.43 per share. Excluding the special items, fourth quarter 2019 net income was $163 million or $1.71 per share compared to the fourth quarter 2018 net income of $205 million or $2.17 per share. Fourth quarter net sales were $1.7 billion in both 2019 and 2018. We also expect lower export prices. Containerboard volumes will be lower due to scheduled outages at our three largest mills during the quarter, but we do expect higher corrugated product shipments. Considering these items, we expect first quarter earnings of $1.20 per share.

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At our off-campus apartment communities and those on-campus apartment communities that American Campus leases in the open market, on a monthly average basis for April, May and June, 93.7% of our residents made their rent payments. For those that were not able to meet their financial obligations due to hardship, through our resident hardship program we provided nearly $9 million of direct financial relief to more than 6,500 of our residents and their parents. We also provided an additional $15 million of financial relief to students and parents at our ACE on-campus communities where leasing administration, rent collections and residence life are administered by our university partners. In addition, our waiving of fees associated with the payment and collection of rent resulted in more than $2 million of budgeted revenues not being collected during the quarter. As the team will discuss, this $24 million in financial relief and the waiver of fee income makes up the large majority of our diminished revenue for the quarter. As reported in the College -- in the Chronicle -- excuse me, as it reported in the Chronicle of Higher Education, at this time, 63 of our 68 universities served are conducting some component of in-person classes. And it's worth noting, we also continue to have leasing activity of property serving the five universities that have announced predominantly online curriculum delivery, with our four same store properties at these schools being 90% leased and with potential no shows and request for reletting currently representing only 5% potential diminishment in occupancy. Two, universities now having available data on how COVID impacts the 18 to 22-year-old student demographic and having an improved understanding of how modern apartment style student housing and in-suite bath residence halls facilitate a student's ability to sanitize their own living environment and to isolate in households of two to four residents in times of outbreak. And four, the continued incremental improvement we see in our overall leasing data, coupled with well above normal velocity compared to the same period prior year with regard to traffic, applications, leases and renewals for the last three, 10 and 20 days at our open market properties as of July 17. As you saw in last night's release, with a range of five to 11 weeks left before the commencement of classes, we are now 90% pre-leased for the upcoming academic year, only 340 basis points behind the prior year. While the variance to prior year increased from the 230 basis points in our May 31 leasing update, it is worth noting that the variance to prior year at our open market leasing properties have decreased since that time. And when you review page S8 in our supplemental, the three, 10 and 20-day velocity trends in traffic, applications, leases and renewals would suggest that variance to the prior year should continue to decrease for that core category of properties. Thus far, throughout this lease-up, we have had 178 renewal skips, which is consistent with our historical levels. As we have commented to the market over the years, we typically only lose a total of 35 basis points to 60 basis points of final occupancy, with that net loss always having been reflected in the final leasing statistics we report each year. To be clear, our final fall lease-up occupancy average of 97.5% over the years has always been net of the impacts of the process as we just discussed. We've also often commented over the years that we believe one of the reasons our fall occupancies typically exceed the industry average by 200 basis points is our diligent administration of this process versus our peers. At our properties leased in the open market, we currently have a total of 72,009 leases for fall, with 28,057 being returning renewal residents that have already taken -- already have possession of their units and 43,952 being new incoming leases, with this latter category representing a greater no show risk. In addition to our standard email protocols, which again were implemented earlier than usual this year, we, as of this date, have made a total of 64,029 phone calls and successfully have had direct in-person dialog with 68% of our new incoming leases and 20% of our returning renewals. As of yesterday, July 20, we have identified 689 potential no shows as compared to 135 in the prior year. With regard to relet request, we currently have 1,563 for the current year as opposed to 956 in the prior year. The combined current year total potential no show relet at this time represents approximately 230 basis points of potential lost occupancy versus 110 basis points in the prior year. As an example, last year, the 135 potential no shows as of July 20 hit a high of 446 on August 5 of last year. Through our normal processes, we successfully managed the final impact to only 38 basis points of diminishment due to actual no shows and successful reletting. Well, as of July 20, the combined no show and relet net variance to last year's is 1,161, representing 120 basis points of potential lost occupancy. As we have discussed earlier in the summer, of the approximately 470,000 on-campus beds in the 68 owned markets we serve, over 180,000 of those beds are largely in older traditional residence halls with community bathrooms where as many as 20 to 40 students share common sinks, toilets and showers in small confined spaces, a less than ideal product with regard to consumer preference and the ability to control sanitization to minimize the spread of viruses. With many universities looking to de-densify this product type by converting double bedrooms to singles, thus cutting in half the number of students sharing these common restroom and bathing facilities, the potential existed for on-campus capacity to be reduced by as much as 90,000 beds. Based upon our tracking of these de-densification activities by the universities we serve, at this time, 48 of the 68 universities served are de-densifying their on-campus housing, resulting in a reduction of 45,800 on-campus beds. In addition, a total of 50 of the 68 universities are taking an additional 9,735 on-campus beds offline to use as quarantine housing should a second wave of coronavirus occur, resulting in an actual total reduction of more than 55,500 beds on campus this fall. As universities are in the final stages of administering these plans and given the fact that to date we have not yet seen a positive variance in velocity in the 48 markets where de-densification is occurring as compared to the 20 where it is not, we are hopeful that we have yet to see the additional off-campus demand that yet may occur. With regard to on-campus densification impacting our own portfolio via compliance with any mandates covering on-campus university housing, we're pleased to report that we have only 1,061 beds impacted at this time, representing only 110 basis points of capacity lost to our portfolio's designed beds. At this time, the 90.1% of leases in place are at an average rent of $807 per bed for a 1.6% increase over the prior year in place average rent. This resulted in property same-store revenues decreasing by 14.2% which we were able to partially offset with savings and operating expenses of 5.7% for a combined NOI decrease of 20.9%. Over 60% of our portfolio is garden style apartment or townhome units which typically feature exterior unit entries and by nature have less interior circulation and common area interaction. The balance of our communities consist of 30% mid-rise products and 9% high-rise buildings that rely on the use of common elevator banks and single point entries which require additional mitigation. The annual operation expense on these items is approximately $2.5 million to $3 million. While the situation remains fluid, we will have 1,600 beds available in August, increasing to 2,600 beds in January 2021 ready to occupy DCP participants once the program recommences. After discussions with the University, we anticipate that the project will open at 60% capacity and a single occupancy configuration for this fall. With regards to USC Health Sciences phase two, we are currently 72% pre-leased and are working through continued leasing activity and the no show process for fall. We have a strong pipeline of on-campus development of 10 projects in various levels of pre-development. Within ACC's 68 markets, we are tracking 17,600 beds currently under construction for 2021, with a potential additional 1,200 beds planned, but not yet under construction, reflecting a decline of 14% to 20% in new supply off the current year's decline of 20%. As we reported last night, total FFOM for the second quarter of 2020 was $50.9 million or $0.37 per fully diluted share. While we cannot completely isolate every item related to the pandemic, we believe approximately $23 million to $24 million in FFOM was lost due to situations surrounding the pandemic this quarter. Overall, owned property revenue was $32.4 million negatively impacted by COVID related rent relief, lost summer camp revenue, increased bad debt and waived fees and other items. Somewhat offsetting the lost revenue, owned property operating expenses were $8 million lower than originally budgeted as we were able to reduce spend in each area except for the uncontrollables of insurance and property taxes. As a result of the lower than originally budgeted property NOI, ground lease expense was approximately $500,000 less due to a reduction in outperformance rent being paid to our university ground lessor partners. And joint venture partners' noncontrolling interest in earnings was approximately $1.2 million lower. Additionally, third-party management fee income was approximately $1 million lower and FFOM contribution from our on-campus participating properties was also almost $800,000 lower due to universities refunding a portion of spring rents at properties in both of these business segments. Lastly, we were able to create approximately $800,000 in G&A and third-party overhead expense savings relative to our original plan for the quarter. We also have some additional anticipated refunds in our on-campus ACE portfolio for the remainder of the summer term, expected to be in the range of approximately $1.5 million to $2.5 million, which should still keep us within the originally communicated range of expected refunds. And finally, with regards to other income, we continue to expect a little to no summer camp business, and we are continuing to waive late fees and convenience fees through the remainder of the current academic year, which, combined, is expected to result in the loss of $5 million to $6 million in other income in the third quarter. These projects were expected to contribute a combined $4 million in development fee income in 2020. We further improved the Company's balance sheet liquidity in June with a well-received 10 year $400 million bond offering, using the proceeds to reduce the outstanding balance on the Company's $1 billion revolving credit facility. As of June 30, we had over $800 million of availability on our revolver, with no remaining debt maturities in 2020 and a manageable $167 million in secured mortgage debt maturing in 2021. As detailed on page S15 of our earning supplemental, including all projects currently under development for delivery through 2023, we have only $279 million in remaining development capital needs. As of June 30, the Company's debt to total asset value was 40.9% and net debt to EBITDA was 7.6 times. Although our leverage ratios are temporarily elevated at this time relative to the targets we have historically communicated due to the short-term COVID related disruption discussed, we feel confident about the capital plan we continue to lay out on page S15, which will bring the Company's debt to total assets back into the mid-30% range and debt to EBITDA back to the high-5 times to low-6 times range.

This resulted in property same-store revenues decreasing by 14.2% which we were able to partially offset with savings and operating expenses of 5.7% for a combined NOI decrease of 20.9%. As we reported last night, total FFOM for the second quarter of 2020 was $50.9 million or $0.37 per fully diluted share. We also have some additional anticipated refunds in our on-campus ACE portfolio for the remainder of the summer term, expected to be in the range of approximately $1.5 million to $2.5 million, which should still keep us within the originally communicated range of expected refunds. As of June 30, we had over $800 million of availability on our revolver, with no remaining debt maturities in 2020 and a manageable $167 million in secured mortgage debt maturing in 2021.

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Examples include, migrating to cloud based financial systems over 18 months ago, making work-from-home seamless for most of our employees, creating a technology package for Camden communities that provides discounted high-speed Internet, creating a more robust work-from-home experience for our residents, implementing a resident package delivery program that requires packages to be delivered directly to each resident's front door, creating the same flexibility and convenience enjoyed by most single-family homeowners and developing Chirp, a mobile access solution, which we sold to RealPage last fall. We anticipate overall same-property revenue growth this year in the range of down 25 basis points to up 1.75% for our portfolio with the majority of our markets falling within that range. The outliers on the positive side would be Phoenix, San Diego, Inland Empire and Tampa, which should produce revenue growth in the 3% to 4% range. At the low end of that range would be Houston, which is likely to remain in the down 2% range. Expected same-property revenue growth for 2021 is 75 basis points at the midpoint of our guidance range and all markets received a grade of C or higher with an average rating of B for the overall portfolio. Other economists have projected up to 1.9 million jobs and 175,000 completions. For 2021, our top ranking once again goes to Phoenix with an average of 5% revenue growth over the past three years and expected revenue growth of 3% to 4% this year. Supply and demand metrics for 2021 looks strong in Phoenix with estimates calling for over 90,000 new jobs and roughly 9,000 new units coming online this year. Up next are San Diego Inland Empire and Tampa, both earning A minus ratings and improving outlooks with 2021 revenue growth also projected in a 3% to 4% range and both markets produced 1% to 2% revenue growth last year but are budgeted to accelerate in 2021 given recent trends. Similar to Phoenix, the San Diego Inland Empire market projects nearly 100,000 new jobs in 2021 with new supply of only around 7,000 apartments. Tampa should deliver around 7,000 new units with roughly 50,000 new jobs being created, providing a good balance of supply and demand in both of those markets. Atlanta and Raleigh round out our Top 5 with budgeted revenue growth of around 2% for 2021 and ratings of A minus and stable. In Atlanta job growth is expected to rebound to over 100,000 with only 7,000 new apartment completions and Raleigh projections call for 40,000 additional jobs with completions in the 4,000 to 5,000 unit range. All of these markets have been strong performers for us over the past several years, averaging nearly 3% annual property revenue growth over the last three years and 2% last year, but we do expect market conditions to moderate over the course of 2021, given steady levels of new supply and increasing competition for new renters. Supply demand ratios in Denver and DC remained steady with 65,000 and 90,000 new jobs anticipated respectively during 2021 with new supply coming in at roughly 8,000 and 12,000 new units respectively scheduled for delivery this year. In Austin, new supply has been coming online steadily for several years with over 15,000 new units expected this year offset by roughly 60,000 new jobs. New supply has remained steady over the past few years at roughly 10,000 new units. The 2021 estimates call for 70,000 new jobs in that market this year. Competition from for sale and rental condominiums is still an issue in that market, but we expect slightly better operating conditions in 2021 and an improvement from the down 0.4% same-property revenue growth achieved last year. New development activity remains strong, so the level of supply should be steady this year with roughly 8,000 to 10,000 completions versus 25,000 to 30,000 new jobs. Approximately 7,500 new units are anticipated this year versus roughly 8,000 that came online last year and the city should add over 50,000 new jobs. Conditions in Dallas are similar with 17,000 new deliveries expected this year but job growth estimates are much stronger with over 110,000 new jobs expected. A healthy economy in 2021 should help Dallas absorb the over 20,000 units it's delivered in each of the past few years. LA Orange County faces healthy operating conditions without supply and demand metrics, job growth should be around 130,000 new jobs with completions of roughly 18,000 apartments expected this year. Estimates for new supply are once again over 20,000 apartments coming online this year. However, Houston's job growth may post decent recovery this year with nearly 100,000 new jobs expected which would certainly help absorb some of the inventory in our market. As I mentioned earlier, all of our markets should achieve between a minus 2% and a plus 4% revenue growth this year and we expect our 2021 total portfolio same property revenue growth to be 0.75% at the midpoint of our guidance range. Same-property revenue growth was one 0.1% for the fourth quarter and 1.1% for the full year of 2020. Our top performers for the quarter were Phoenix at 5.7%, Tampa at 2.9%, Raleigh at 1.5% and Atlanta at 1.3% growth. Rental rate trends for the fourth quarter were as expected with both signed and effective leases down around 4%, renewals in the mid-to-high 2% range for a blended rate of roughly down 1%. February and March renewal offerings are being sent out on an average of roughly 3% increase. Occupancy averaged 95.5% during the fourth quarter compared 95.6% last quarter and 96.2% in the fourth quarter of 2019. January 2021 occupancy has averaged 95.7% compared to 96.2% last January and is slightly up from 4Q20 levels. Annual net turnover for 2020 was 200 basis points lower than 2019 at 41% versus 43% and as expected, move-outs to purchase homes rose seasonally for the quarter to about 19% but we're still at about 15% for the full year of 2020, which compares to an average full year move-out rate of about 15% over the last four years. During the fourth quarter of 2020, we completed construction on both Camden Rhino, a 233 unit, $79 million new development in Denver and Camden Cypress Creek II, a 234 unit, $32 million joint venture new development in Houston. Also during the quarter, we began leasing at Camden North End Phase II, a 343 unit $90 million new development in Phoenix and we acquired 4 acres of land in Downtown Durham, North Carolina for the future development of approximately 354 apartment homes. In the quarter, we collected 98.6% of our scheduled rents with only 1.4% delinquent. Once again, this compares favorably to the fourth quarter of 2019 when we collected 97.9% of our scheduled rents with an actually higher 2.1% delinquency. When a resident moves out owing us money, we typically have previously reserved 100% of the amounts owed as bad debt and there will be no future impact to the income statement. Last night, we reported funds from operations for the fourth quarter of 2020 of $122.4 million or $1.21 per share, $0.03 below the midpoint of our prior guidance range of $1.21 to $1.27. This $0.03 per share variance of the midpoint resulted entirely from an approximate $0.035 or $3.5 million non-cash adjustment to retail straight-line rent receivables during the fourth quarter. Over 95% of this amount is from one retail tenant. For 2020, we delivered full year same-store revenue growth of 1.1%, expense growth of 3.8% and an NOI decline of 0.4%. You can refer to Page 28 of our fourth quarter supplemental package for details on the key assumptions driving our financial outlook. We expect our 2021 FFO per diluted share to be in the range of $4.80 to $5.20 with the midpoint of $5 representing a $0.10 per share increase from our 2020 results. After adjusting for the fourth quarter 2020 $0.035 write-off of retail straight-line rent receivables and the 2020 full year $0.15 of COVID-19 related impact, which included approximately $0.095 of resident relief funds, $0.03 of frontline bonuses and $0.02 of other directly related COVID expenses, the midpoint of our 2021 guidance represents an $0.08 per share core year-over-year FFO decrease, which results primarily from an approximate $0.08 per share decrease in FFO due to higher net interest expense, which results primarily from the full-year impact of our April 2020 bond offering and actual and projected 2020 and 2021 net acquisition and development activity. An approximate $0.06 per share decrease in FFO resulting primarily from the combination of higher general and administrative, property management and fee and asset management expenses combined with lower interest income resulting from lower cash balances and rates, an approximate $0.055 per share decrease in FFO related to the performance of our same-store portfolio. At the midpoint, we are expecting a same-store net operating income decline of 0.85% driven by revenue growth of 0.75% and expense growth of 3.5%. Each 1% change in same-store NOI is approximately $0.06 per share in FFO. An approximate $0.04 per share decrease in FFO from an assumed $450 million of pro forma dispositions toward the end of 2021, an approximate $0.02 per share decrease in FFO from our retail portfolio, an approximate $0.015 decrease in FFO due to the non-recurrence of our third quarter 2020 gain on sale of our Chirp technology investment and an approximate $0.01 per share decrease in FFO from lower fee and asset management income. This $0.28 cumulative decrease in an anticipated FFO per share is partially offset by an approximate $0.11 per share net increase in FFO related to operating income from our non-same-store properties resulting primarily from the incremental contribution of our six development communities in lease-up during either 2020 and/or 2021 and finally, an approximate $0.09 per share increase in FFO due to an assumed $450 million of pro forma acquisitions mid-year. Our 3.5% budgeted expense growth at the midpoint assumes insurance expense will increase by approximately 30% due to the continued unfavorable insurance market. Property insurance comprises approximately 4% of our total operating expenses. The remainder of our property-level expense categories are anticipated to grow at approximately 2.5% in the aggregate. Page 28 of our supplemental package also details other assumptions, including the plan for $120 million to $320 million of on-balance sheet development starts spread throughout the year. We expect FFO per share for the first quarter of 2021 to be within the range of $1.20 to $1.26. After excluding the $0.035 per share fourth quarter 2020 write-off of retail straight-line receivables, the midpoint of $1.23 for the first quarter represents a $0.015 per share decrease from the fourth quarter of 2020 which is primarily the result of a combination of lower fee and asset management income and higher overhead expenses attributable in part to the timing of our annual salary increases. As of today, we have just over $1.2 billion of liquidity, comprised of approximately $320 million in cash and cash equivalents and no amounts outstanding on our $900 million unsecured credit facility. At quarter-end, we had $325 million left to spend over the next three years under our existing development pipeline and we have no scheduled debt maturities until 2022. Our current excess cash is invested with various banks, earning approximately 30 basis points.

Last night, we reported funds from operations for the fourth quarter of 2020 of $122.4 million or $1.21 per share, $0.03 below the midpoint of our prior guidance range of $1.21 to $1.27. We expect our 2021 FFO per diluted share to be in the range of $4.80 to $5.20 with the midpoint of $5 representing a $0.10 per share increase from our 2020 results. Each 1% change in same-store NOI is approximately $0.06 per share in FFO.

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