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Comparing our results in 2017, we've taken our attritional ratio down by nine points to 55.1 this year and brought our current year ex-cat combined ratio by 10 points to 88.7, the best since 2007. All the while, we reduced our PML by over 50% across the curve. In 2021, industry cat losses are up about 40%, and but our cat loss ratio stayed flat at nine and a half. This is still higher than we target, even in a $100 billion-plus cat year, and we're actively continuing our disciplined actions to reduce our cat exposure and deliver more consistent earnings. Importantly, we continue to build a very successful specialty insurance franchise, which produced $4.9 billion of gross premium in 2021, making up 63% of our writings, up from 50% in 2017. We expect that number to approach 70% this year as we capitalize on our already well-established presence in some of the most attractive P&C markets today. Our insurance business is producing excellent results, growing production by 20%, generating record new business and total premiums, while at the same time, strengthening the overall portfolio. Our insurance segment delivered a combined ratio of 91.6 this year, the best since 2010 and a parent year ex-cat combined ratio of 85.9, the lowest since 2006. Our reinsurance business also delivered improved performance and it's an encouraging sign of progress that in a very high cat year for the industry, it produced a combined ratio below 100. In addition, the current year ex-cat combined ratio of 86.3 was the best since 2012. Indeed, during the recent January 1 renewals, where we write more than 50% of our reinsurance business, we advanced our corporate objectives to reduce volatility, allocate capital rigorously, and produce the most optimized portfolio for the current market. As such, we took decisive action and reduced our reinsurance property and property cat premiums by 45%. During the quarter, we generated net income available to common shareholders of $197 million and an annualized ROE of 16.4%. Operating income was 182 million, and annualized operating ROE was 15.1%. The combined ratio for the quarter was 93.1%, with core underwriting results continuing to show improvement. The company produced a consolidated current accident year combined ratio ex-cat and weather of 89.5 points, or 2.3 points better than the prior year quarter. The consolidated current accident year loss ratio ex-cat and weather was 54.3%, a decrease of more than three points over the prior year quarter. The quarter's pre-tax cat and weather-related losses net of reinsurance were $54 million or 4.3 points. This compares to 198 million or 18.4 points in 2020. 2020 did include 125 million or 11.6 points attributable to the COVID-19 pandemic. There was no change in the total net loss estimate of 360 million established in 2020 for the COVID pandemic. We reported net favorable prior year development of $9 million in the quarter, and this compared to 7 million in the fourth quarter of 2020. The consolidated acquisition cost ratio was 20.4%, a decrease of 0.9 point over the prior year quarter, and that was attributable to both segments. The consolidated G&A expense ratio was 14.8%, an increase of 1.7 points compared to the fourth quarter of '20. The fourth quarter '21 ratio was 13.5%, and this would compare to a normalized 4Q 2020 of 13.8%. We continue to focus on expense efficiency and expect to achieve a mid-13 G&A ratio going forward. And lastly, on a consolidated basis, fee income from strategic capital partners was 27 million for the quarter, compared to 13 million in the prior year, largely associated with an increase in our investment manager of performance fees. Gross premiums written increased by 19% to 1.3 billion, making it our highest fourth quarter ever. I would also note that the year-to-date gross premiums written of 4.9 billion, was also a record for the insurance segment. The current accident year loss ratio ex-cat weather decreased by 5.3 points, resulting from not only the impact of favorable rate over trend but also driven by improved loss experience in several lines of business. Pretax catastrophe and weather-related losses net of reinsurance were 23 million. I would note that the fourth quarter is the smallest quarter for gross premiums written for reinsurance representing less than 10% of their annual gross premiums. The current accident year loss ratio ex-cat weather increased by 0.2 point, resulting from the change in business mix as we increased writings in accident and health and liability along with a decrease in premiums earned in catastrophe and credit surety businesses. Pretax catastrophe and weather-related losses net of reinsurance were 32 million. The acquisition cost ratio decreased by 0.4 points compared to the prior year quarter. Net investment income was 128 million for the quarter, and this compared to net investment income of 110 million for the fourth quarter of 2020. With respect to yields, at the end of the year, the fixed income portfolio had a book yield of 1.9% and a duration of three years, and our new money yield was 1.7%. Diluted book value per share increased to $55.78. The average rate increase in our insurance book was more than 14% for the fourth quarter. For the full year, rates also averaged up 14%, which was nearly identical to the increases that we saw in 2020. By class of business, professional lines once again saw the strongest pricing actions with average rate increases of close to 24% for the quarter and nearly 22% for the year. For the quarter, Cyber increased nearly 80% and averaged 50% for the year. Excluding cyber, other professional lines are averaging 13% for the quarter and 14% for the year. Breaking it out further, London is averaging more than 18% for the quarter and the year, Canada is averaging more than 30% for the quarter and 24% for the year, while in the U.S., rates are averaging about 9% for the quarter and about 11% for the year. Property rates increases were close to 10% for both the quarter and the year. This included renewable energy, where we're a global leader at 13% for the quarter and the year. While in marine and political risks, those increased 11% for the quarter, with an annual average just shy of 8%. During the quarter, 96% of our insurance portfolio renewed flat to up and about half of the increases were double digit. We estimate that for the full year 2021, we averaged reinsurance rate increases of about 11%. So I'll focus my comments on 1/1. There's been a lot of talk already in the industry about 1/1 and there's no doubt that pricing is making further progress. At AXIS, during the January 1 renewals, we saw average rate increases of about 9%. Our international book renewed at average increases of more than 10%, while our North American book generated increases of 9%. In those loss impacted treaties, you would have seen increases in the 25% to 50% range. This was evidenced by a 70% reduction in gross premiums for aggregate treaties and a 75% reduction in gross premiums on low-attaching treaties among our various actions, leading to a 45% reduction in property and property cat reinsurance premiums at the 1/1 renewals as compared to the prior year. Given the changes expected to our portfolio to reduce both frequency and severity, our average rate increase on profit was 7%. So with reduction to the property and catastrophe exposure, these two lines represented about 17% of our 1/1 renewal premiums, down from 27% in the 1/1 renewal portfolio last year.

During the quarter, we generated net income available to common shareholders of $197 million and an annualized ROE of 16.4%.

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These projects are expected to increase our generation portfolio by 50% to approximately 1.5 gigawatts by 2023, with a significant contribution coming from our energy storage business. This next step-up in the size of our overall portfolio represents approximately 29% increase in our geothermal and solar capacity, and up to approximately 400% increase in our energy storage assets by the end of 2023. As a result of our ambitious plan, we estimate that we will reach an annual run rate of $500 million in adjusted EBITDA toward the end of 2022, that we expect to continue to grow as we move forward with our plans in 2023 and onwards. Total revenue for the full year 2020 were $705 million, down 5.5% from prior year. In the quarter, revenues were down 6.8% over last year. Full year 2020 consolidated gross profit was $276.3 million, resulting in a gross margin of 39.2%, 310 basis points higher than in 2019. 2020 ended with a net income attributable to the company stockholders of $85.5 million. Diluted earnings per share for 2020 declined by 4% compared to last year, mainly impacted by a nonrecurring tax benefit recorded in 2019. Excluding this tax benefit, diluted earnings per share increased by 13%. For the quarter, diluted earnings per share increased 62.5% to $0.39 per share. Adjusted EBITDA increased 9.3% to $420.2 million in 2020. For the quarter, this was 7% increase compared to 2019. In the product segment, revenue declined 22.5%, representing 21% of the total revenue in 2020. Energy Storage segment revenues increased 7.6% year-over-year, to $15.8 million and represented 2% of our total revenue for the full year 2020. In the fourth quarter, the electricity segment revenues grew 1.3% to $146 million while product segment revenue decreased 37.5% to $27 million in the fourth quarter of 2020. Energy Storage segment revenue were $5.8 billion, increasing 36% year-over-year compared to $4.3 million in the fourth quarter of 2019. Gross margin for the electricity segment for the full year expanded year-over-year to 44.6%. For the fourth quarter, gross margin was 45.2%. Electricity gross profit in the full year 2020 was positively impacted by $7.8 million in business interruption insurance payments compared to $9.3 million in 2019. In the product segment, gross margin was 22.4% in the full year of 2020 compared to 23.6% in the prior year. In the fourth quarter, we saw an increase in gross margin in the product segment of 160 basis points to 29.8%. Energy Storage segment reported a positive gross margin of 11.1% for 2020 compared to a negative gross margin in 2019. The electricity segment generated 92% of the total adjusted EBITDA in the full year of 2020, and electricity segment adjusted EBITDA increased 11% over last year. The product segment generated 7% of the total adjusted EBITDA for the full year of 2020. The Storage segment reported, for the first time, a full year positive adjusted EBITDA of $3.2 million, including $1.7 million in the fourth quarter. For the full year 2020, we successfully raised approximately $760 million in the aggregate, including $340 million net proceeds from the issuance of common stock, [$290] million profit from the Bond Series four and approximately $130 million of proceeds from senior unsecured loan. Our net debt as of December 31, 2020, was $920 million. Cash and cash equivalents and restricted cash and cash equivalent as of December 31, 2020, was $537 million, compared to $153 million as of December 31, 2019. The accompanying slide breaks down the use of cash for the 12 months and illustrate our ability to invest back in the business, service the debt and continue to return capital to our shareholders in the form of cash dividends, all from cash generated by our operation. Our long-term and short-term debt as of December 31, 2020, was $1.46 billion, net of deferred financing costs. The average cost of debt for the company is currently 4.7%. On February 24, 2021, the company's Board of Directors declared, approved and authorized a payment of quarterly dividend of $0.12 per share pursued to the company dividend policy. In addition, we expect to pay dividend of $0.12 per share in the next three quarters, representing a 9% increase over Q3 2020 dividend. Power generation in our power plants declined by 3.1% compared to last year. However, revenues of our electricity segment remain unchanged with higher average rate per megawatt hour of $89.6 compared to $86.6 million for last year. We adjusted the generation capacity of our existing power plants based on their performance this year, as detailed on the slide, and the current portfolio stands at 932 megawatts compared to 914 megawatts last year. This year, the main addition was 19 megawatts in Steamboat complex following the completion of the Steamboat enhancement. As noted on slide 13, Puna reserved operations in November 2020, 2.5 years after the eruption of the Kilauea volcano, currently, at low output relative to its generating capacity before the eruption. In November, Puna reached 10-megawatt generating capacity, and now it is offering at 13 megawatts. On the insurance front, for the entire 2020, we collected $29.1 million insurance proceeds, the $7.8 million were recorded under cost of revenues and the balance in other operating income. As discussed earlier, one of the impacts COVID had on our operations in Kenya relates to increased curtailment there by KPLC, which was the main driver to a reduction in revenue of approximately $6.5 million compared to prior year. Also in Kenya, we had an important achievement, concluding all open tax audits with the Canadian tax authorities and reached a favorable settlement related to the 2019 Flex assessment originally totaling $200 million. As of February 24, 2021, our product segment backlog was $33 million. Inter-segment revenue increased more than 30% over 2019 and 130% over 2018. In order to reduce our merchant risk and increase our contracted in 2021, the company signed a transaction for 80% of the volume at a fixed rate, exchanging the floating RF revenue -- for a fixed our revenue at the end of 2020. Due to the inability to operate the facility during these times, we expect to record in Q1 financial results, up to approximately $11 million of nonrecurring loss associated with this hedge. Our operating portfolio stands to date at over one gigawatt, comprising of 873 megawatts of geothermal, 53 megawatts offering, 7-megawatt of hybrid solar and 73 megawatts of energy storage. We have a robust growth plan to increase by 2023, our total portfolio by almost 50%, with a significant contribution from the Energy Storage business, as detailed in the following slide. From our previous estimate of approximately 170 megawatts by end of 2022 to between 250 and 270 megawatts by the end of 2023, representing a total increase of up to 29%. In our rapidly growing energy storage portfolio, we are planning to enhance our growth and to increase our portfolio by up to approximately 400% -- between 200 megawatts to 300 megawatts by the end of 2023. This represents a significant increase compared to our previous growth target of 80 to 175 megawatts, we set for 2021, 2022. The next slide explains 14 projects under way that comprise the majority of our 2023 growth plans. Moving to slide 24 and 25. Our current pipeline presented in slide 25, which is updated frequently include 33 names, potential projects with a total potential capacity of over one gigawatt, which are in different stages of development. As I mentioned earlier, we believe that we can develop from this potential pipeline between 200 to 300 megawatts by the end of '23, mainly in Texas, New Jersey and California. To fund this growth, we have over $900 million of cash and available and restricted cash and lines of credits. Our total expected capital expense for 2021 includes approximately $450 million for capital expenditure for construction of new projects of geothermal, solar and storage; enhancement to our existing geoterminal power plant at management release for construction; maintenance of capital expenditures, including our work at the Puna power plant; and enhancements to our production facilities as detailed in slide 32 in the appendix. We expect total revenues between $640 million and $675 million, with electricity segment's revenue between $570 million and $580 million. The electricity segment includes $32 million from the Puna power plant in Hawaii, assuming we are without plans, mainly close to full operations in mid-2021. We expect product segments revenue between $50 million to $70 million. Revenues for energy storage is expected to be between $20 million and $25 million. We expect adjusted EBITDA to be between $400 million and $410 million. We expect annual adjusted EBITDA attributable to minority interest to be approximately $32 million. In addition, safe harbor provision for renewable energy developers to claim this tax credit was extended from five to 10 years. Finally, a few days ago, the California Public Utility Commission, the CPUC issued a ruling requesting comment on a proposal for 1,000 megawatts, each of new geoterminal and long duration storage procurement between 2024 and 2026. With the tailwind of this support, 2021 is going to be a significant buildup year, accelerating our growth in the storage and electricity with a goal to reach $500 million of annual run rate of adjusted EBITDA toward the end of 2022, that we expect to continue to grow as we move forward with our plans in 2023 and onwards.

For the quarter, diluted earnings per share increased 62.5% to $0.39 per share. We expect total revenues between $640 million and $675 million, with electricity segment's revenue between $570 million and $580 million. We expect adjusted EBITDA to be between $400 million and $410 million.

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I want to mention that the Board of Directors has approved the quarterly dividend of $0.30 per share for the third quarter, an increase of $0.02 per share or 7% from the second quarter, which is, we believe, is supported by our increased collection efforts in the second quarter, improving traffic in Waikiki at our Embassy Suites and our expectation for operations to continue trending favorably in the near term. Our collections have continued to improve each quarter with a collection rate north of 96% for the second quarter. Furthermore, we had approximately $850,000 of deferred rent due from tenants in Q2 based on COVID-19 related lease modifications. And we have collected approximately 94% of those deferred amounts, further validating our strategy of supporting our struggling retailers through the government-mandated closures. About half of our over 250,000 square feet of vacant retail space or in lease negotiations or LOI stage, deals that we believe we have a good likelihood of being finalized. On the multifamily front, with new management in place at Hassalo, we are currently 99% leased and asking rents are trending up almost 20% since December 2020. In San Diego, our multifamily properties are currently 97% leased, and we have leased approximately 90% of the 133 master lease units that expired less than two months ago and expect the remaining to be leased over the next few weeks. Asking rents at our multifamily properties are trending up as well in San Diego, almost 10% since December 2020. Last night, we reported second quarter 2021 FFO per share of $0.51 and second quarter '21 net income attributable to common stockholders per share of $0.15. First, as Ernest previously mentioned, the Board has approved an increase in the dividend to its pre-COVID amount of $0.30 per share based on the continued improvement in our collections as expected, but the overriding factor was the strong results we are seeing at the Embassy Suites Hotel in Waikiki beginning in mid-June and increasing into July with a strong pent-up demand. Q2 paid occupancy was 67%, and the month of June by itself reached approximately 83%. The average daily rate was $274 for Q2 and approximately $316 for the month of June. RevPAR or revenue per available room was $184 for Q2 and approximately $262 for the month of June. The Oahu is still under tier five of its reopening plan until Hawaii's total population is 70% fully vaccinated, which should occur in the next month or two. Bars and restaurants in Oahu can be at 100% capacity as long as all customers show their vaccination card or a negative COVID test on entry. The Japanese wholesale market had accounted for approximately 35% to 40% of our customer base pre-COVID. Japan is currently just 9% fully vaccinated. Though with its current pace of over one million vaccines a day, Japan is expected to be completing vaccinations by this November and to start issuing vaccine passports in the next 30 days, in anticipation of opening up international travel. Secondly, looking at our consolidated statement of operations for the three months ended June 30th, our total revenue increased approximately $7.8 million over Q1, which is approximately at 9.3% increase. Approximately 37% of that was the outperformance of the Embassy Suites Hotel as California and Hawaii began to open up travel. Additionally, our operating income increased approximately $6.3 million over Q1 '21, which is approximately an increase of 31%. Third, same-store cash NOI overall was strong at 23% year-over-year. Multifamily was down primarily as a result of Pacific Ridge Apartments at 71% leased at the end of Q2 due to the recurring seasonality of students leaving in May, including the expiration of the USD master lease and new students leasing over the summer before school starts in late August. Generally, approximately 60% of our 533 units at Pacific Ridge are leased by students, with the USD campus right across the street. As of this week, we are approximately 90% leased at Pacific Ridge with approximately 150 students moving in over the next several weeks in August. Hassalo on Eighth in the Lloyd District of Oregon is a 657 multifamily campus. At the end of Q1, occupancy was approximately 84% due to the lingering impact of COVID and political challenges in the prior months. As of Q2, we have increased the occupancy to approximately 95%. And fourth, as previously disclosed, we acquired Eastgate Office Park on July 7th, comprised of approximately 280,000 square foot multi-tenant office campus, in the premier I-90 corridor submarket of Bellevue, Washington, one of the top-performing markets in the nation, the Eastside market is anchored by leading tech, life science, biotech and telecommunication companies. The four-building Eastgate Park is currently greater than 95% leased to a diversified tenant base with in-place contractual lease rates that we believe are 10% to 15% below prevailing market rates for the submarket. Additionally, Eastgate Park recently obtained municipal approval for rezoning, increasing the floor area ratio from 0.5 to 1.0, which will allow for additional development opportunities. The purchase price of approximately $125 million was paid with cash on the balance sheet. The going-in cap rate was approximately 6% with an unlevered IRR north of 7%. We believe this transaction will be accretive to FFO by approximately $0.05 for the remainder of 2021 and $0.10 for the entire year of 2022. One last point of interest is that on page 16 of the supplemental, total cash net operating income, which is a non-GAAP supplemental earnings measure, which the company considers meaningful in measuring its operating performance is shown for the three months, ended June 30, at approximately $58.7 million. If you use this as a run rate going forward, it would be approximately $234 million, which would exceed 2019 pre-COVID cash NOI of approximately $212 million. At the end of the second quarter, we had liquidity of approximately $718 million, comprised of $368 million in cash and cash equivalents and $350 million of availability on our line of credit. Our leverage, which we measure in terms of net debt-to-EBITDA was 6.0 times. Our focus is to maintain our net debt-to-EBITDA at 5.5 times or below. Our interest coverage and fixed charge coverage ratio ended the quarter at 3.7 times. At the end of the second quarter, excluding One Beach, which is under redevelopment, our office portfolio stood at approximately 93% leased with less than 1% expiring through the end of 2021. Our top 10 office tenants represented 51% of our total office-based rent. Q2 portfolio stats by region were as follows, our San Francisco and Portland office portfolios were stable at 100% and 96% leased, respectively. City Center Bellevue was 93% leased, net of a new amenity space under development, and San Diego is 91% leased, net of new amenity spaces being added to Torrey Reserve. We had continued success in Q2 preserving pre-COVID rental rates with, 13 comparable new and renewal leases, totalling approximately 50,000 rentable square feet, with an over 9% increased over prior rent on a cash basis, and almost 15% increase on a straight-line basis. The weighted average lease term on these leases was 3.6 years, with just over $7 per rentable square foot in TIs and incentives. We experienced a modest small tenant attrition during the quarter due to COVID, resulting in a net loss of approximately 16,000 rentable square feet or less than 0.5 point of occupancy, none of which was lost to a competitor. Our outlook moving forward is one of positive net absorption with 200 proposal activity picking up significantly. The final phase of the renovation will include a new state of the art fitness complex and conference center, both serving the entire 14 building Torrey Reserve Campus. Construction is in full swing on the redevelopment of One Beach Street in San Francisco, delivering in the first half of 2022, and construction is nearly complete on the redevelopment of 710 Oregon Square in the Lloyd Submarket of Portland. One Beach will grow to over 103,000 square feet and 710 Organ Square will add another 32,000 square feet to the office portfolio.

Last night, we reported second quarter 2021 FFO per share of $0.51 and second quarter '21 net income attributable to common stockholders per share of $0.15.

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Let's go to Page 3. Our revenue and bookings growth continued to outpace our pre-pandemic levels and we exited the quarter with a record high and sequentially increased backlog while posting top line growth of 15% over the comparable period. Demand strength was broad based as each segment posted year-over-year growth in bookings and a book to bill above 1. Revenue growth, product -- positive product mix and ongoing productivity initiatives drove comparable operating margins up resulting in a 31% increase in US GAAP diluted earnings per share [Technical Issues]. Our free cash flow performance was strong with an 18% year-over-year increase despite significant investments we've made in inventory as we begin to reap the benefits of investments in the centralization of financial processing activities. Our updated forecast do not incorporate any material improvement nor deterioration of the challenging operating environment in the fourth quarter. Engineered Products revenue was up 14% organically with a significant portion of the growth from pricing actions. Fueling Solutions was up 3% organically in the quarter on solid demand in North America for above ground and below ground retail fueling. Margins in the segment declined 150 basis points in the quarter as productivity headwinds from supply chain constraints in sub components and negative mix more than offset higher volumes and pricing. Sales in Imaging & Identification grew 7% organically. Margins in Imaging & ID improved by 250 basis points as volume leverage, pricing and productivity initiatives more than offset input cost inflation. Pumps & Process Solutions posted another solid quarter of 25% organic growth. Margins in the quarter expanded by a robust 630 basis points on strong volume, fixed cost absorption, favorable product mix and pricing. Top line results in Refrigeration & Food Equipment remained strong posting 16% organic growth. Our top line organic revenue increased by 13% in the quarter with all five segments posting growth with strong demand in our Engineered Products, Pumps & Process Solutions and Refrigeration & Food Equipment segments. FX benefited the top line by about 1% or $21 million. Acquisitions added $18 million of revenue in the quarter. The US, our largest market, posted 16% organic growth in the quarter on solid trading conditions in retail fueling, industrial automation, biopharma and can making. Europe grew by 16% in the quarter on strong shipments in marking, coding, biopharma and industrial pumps, can making and heat exchangers. All of Asia was up 5% organically on growth in biopharma and industrial pumps and heat exchangers, partially offset by year-over-year declines in polymer processing, below ground retail fueling and fuel transport. China, which represents approximately half of our business in Asia, was up 8% organically in the quarter. Bookings were up 25% organically, reflecting the continued broad based momentum across the portfolio. On the top of the chart, adjusted segment EBIT was up $64 million and adjusted EBIT margin improved 80 basis points as improved volumes, continued productivity initiatives and strategic pricing offset cost inflation and production stoppages. Going to the bottom of chart, adjusted net earnings improved by $57 million as higher segment EBIT and lower corporate expenses more than offset higher taxes. Deal expenses in the quarter were $3 million. The effective tax rate for the third quarter, excluding tax discrete benefits, was approximately 21.8% compared to 21.5% in the prior year. And our effective tax rate estimate pre-discrete for Q4 and the full year remains unchanged at 21% to 22%. Discrete tax benefits were $8 million for the quarter or $4 million higher than in 2020 for approximately $0.03 of year-over-year earnings per share impact. Rightsizing and other costs were a $2 million reduction to adjusted earnings in the quarter as a one-time recovery related to a cancellation settlement more than offset our ongoing productivity and rightsizing initiatives. We are pleased with the cash performance thus far this year with cash -- with free cash flow of $667 million, a $104 million increase over last year. Free cash flow conversion stands at 11% of revenue year-to-date despite a nearly $250 million investment in working capital. Unified Brands represents less than 2% of our overall revenue and its sale will have negligible impact on our '21 adjusted EPS.

Our updated forecast do not incorporate any material improvement nor deterioration of the challenging operating environment in the fourth quarter.

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Barring the company's strong fourth quarter performance and underlying fundamental trends, WAL earned net income of $192.5 million and earnings per share of $1.90 for the quarter, up $108 million year-over-year and nearly flat to Q4. Net revenue expanded 4.5 times the rate of expense as improvement in asset quality and economic conditions drove a $32.4 million relief in loan loss reserve this quarter. Our focus continues to be on PPNR growth, which rose approximately 31% year-over-year to $202 million while marginally lower than last quarter due to two fewer days. Additionally, we signed agreements with the sale of approximately $750 million of mortgage servicing rights to strong counterparties that will allow Western Alliance to retain substantially all the custodial deposits. Turning to the first quarter balance sheet trends, outstating quarterly loan and deposit growth of $1.7 billion and $6.5 billion respectively, lifted total assets to $43.4 billion, up 49% from the prior year. Our deposit growth was broad-based across our franchise, which pushed down our loan-to-deposit ratio of 75% and creates a strong funding foundation for ongoing loan and earnings growth from our commercial loan pipeline and the AmeriHome acquisition. This impressive loan growth drove net interest income of $317.3 million, or $2.5 million higher than last quarter and up 18% on a year-over-year basis. Quarterly net interest margin was 3.37%, down 47% from the fourth quarter as we continued to deploy excess liquidity into loans and investment securities. Non-interest income totaled $19.7 million for the quarter, aided by $7.3 million of warrant income from Bridge Bank. For the quarter, net loan charge-offs were $1.4 million or 2 basis points on an annualized basis. Finally, Western Alliance continues to generate significant excess capital, which grew tangible book value per share to $33.02, or 23.5% year-over-year -- or 23.5% year-over-year growth. We remain one of the most profitable banks in the industry with return on average assets and return on average tangible common equity of 1.93% and 24.2%, respectively. For the quarter, Western Alliance generated net income of $192.5 million or $1.90 per share, each down about 1% from the prior quarter. This is inclusive of a reversal of credit loss provisions of $32.4 million due to continued improvement in economic forecasts relative to year-end 2020 and continued loan [Phonetic] -- in [Phonetic] loan segments with historically very low loss rates. Additionally, merger expenses related to the AmeriHome acquisition of $400,000 were recognized. We expect total merger charges to be approximately $15 million, preponderance of which will be incurred in Q2 as integration continues. Net interest income grew $2.5 million during the quarter to $317.3 million, an increase of 18% year-over-year, primarily as a result of our significant balance sheet growth. However, while average earning assets grew $5.7 billion, the relative proportion held in cash and lower-yielding securities increased to approximately 32% in Q1 from 22% in Q4, which temporarily muted our interest income growth as we prepare to deploy excess liquidity into AmeriHome-generated assets and higher-yielding commercial loans. Quarter-over-quarter, our loan-to-deposit ratio fell to 75% from 85% in Q4 as we proactively look to grow low-cost deposits as dry powder for future loan growth. Non-interest income fell $4.1 million to $19.7 million from the prior quarter, mainly driven by smaller fair value gain adjustments in our securities measured at fair value, but partially offset by $7.3 million in the warrant income. Non-interest expense increased $2.8 million, mainly due to higher deposit costs as lower rates were offset by higher average balances. Continued balance sheet growth generating superior net interest income drove pre-provision net revenue of $202 million, up over 30% from a year ago. Total investments grew $2.4 billion for the quarter or 43% to $7.9 billion compared to an average balance of $6.5 billion. Investment yields declined 24 basis points from the prior quarter to 2.37% due to lower reinvestment rates in the current environment. Similarly, on a linked-quarter basis, linked -- loan yields declined 8 basis points following ongoing mix shift toward residential loans and asset class with generally lower yields than the remainder of the portfolio and lower credit risk. Significantly, quarter-end balances for loans and investments were $3.3 billion higher than the average balances and yielded 3.5% more than our Fed account. Interest-bearing deposit costs were reduced by 3 basis points in Q1 to 22 basis points, due to ongoing repricing efforts and maturities of higher cost CDs. The spot rate for total deposits, which includes non-interest-bearing, was 11 basis points. Net interest income increased $2.5 million to $317.3 million during the quarter or 18% year-over-year as higher loan and investment balances offset net interest margin compression. NIM declined 47 basis points to 337 basis points as our purposeful strong deposit growth in advance of closing the AmeriHome acquisition negatively impacted the margin by 43 basis points. To put this in perspective, average securities and cash balances to interest-earning assets increased meaningfully in Q1 32% from 22%. Additionally, a PPP loan yield of 4.9% benefited the NIM by 8 basis points, which was similar to the fourth quarter benefit. Cumulatively, over the remainder of 2021, we expect to recognize $15.4 million of BBB fees. Our efficiency ratio rose 90 basis points to 39.1%, an increase from 38.2% in Q4. Non-interest expense linked quarter growth increased by 2.1%, driven by higher deposit fees related to the 82% annualized rise in deposit balances. Excluding PPP, net loan fees and interest, the efficiency ratio for the quarter would have been 41%. Pre-provision net revenue declined $4.4 million or 2.1% from the prior quarter, but increased 31% from the same period last year. This results in PPNR and our ROA of 2.03% for the quarter, a decrease of 21 basis points compared to 2.24% for the year-ago period, partially impacted by a much larger asset base. Balance sheet momentum continued during the quarter as loans increased $1.7 billion or 6.1% to $28.7 billion and deposit growth of $6.5 billion brought balances to $38.4 billion at quarter end. Inclusive of the second round of PPP funding, loans grew 24% year-over-year, while deposits grew approximately 55% year-over-year, with our focus on low loan loss segments and DDA. In all, total assets have grown 49% year-over-year as we approach the $50 billion asset level, including AmeriHome. Finally, tangible book value per share increased $2.12 over the prior quarter to $33.02, an increase of $6.29 or 23.5% over the prior year, attributable to both net income and the common stock offering of 2.3 million shares completed during Q1 in anticipation of the AmeriHome acquisition. The majority of the $1.7 billion in growth was driven by an increase in C&I loans of $746 million. Loan growth was also strong in residential real estate loans of $675 million, supplemented by construction loans of $337 million and CRE non-owner-occupied loans of $27 million. Residential and consumer loans now comprise 10.9% of our loan portfolio, an increase from 9.9% a year ago. Within the C&I growth for the quarter and highlighting our focus on low-risk assets, mortgage warehouse loans grew $562 million and Round 2 3P [Phonetic] loans, originations were $560 million, which were nearly offset by $479 million from Round 1 of payoffs. Deposits grew $6.5 billion or 20% in the first quarter driven by increases in non-interest-bearing DDA of $4.1 billion, which now comprise 46% of our deposit base and the savings in money market of $2.9 billion. Total classified assets increased $57 million in Q1 to $281 million due to migration of a few borrowers and COVID-impacted industries, such as travel, leisure and entertainment as reopening continues but at an uneven pace. Our non-performing loans plus OREO ratio declined to 27 basis points to total assets and total classified assets rose 4 basis points to total assets up to 0.65% compared to the ratio at the end of 2020. Special mention loans increased $23 million during the quarter to 1.65% of funded loans. Regarding loan deferrals, as of quarter end, we had $68.5 million of deferrals, all of which are in low LTV residential loans. Quarterly net credit losses were modest to $1.4 million or 2 basis points of average loans compared to $3.9 million in the fourth quarter. Our loan ACL fell $36 million from the prior quarter to $280 million due to improvement in macroeconomic forecast loan growth in portfolio segments with low expected loss rates. In all, total loan ACL to funded loans declined 20 basis points to 97 basis points or 1.03% when excluding PPP loans. For comparison purposes, the loan ACL to funded levels was 84 basis points at year-end 2019 before CECL adoption. We continue to generate capital and maintain strong regulatory ratios with tangible common equity to total assets of 7.9% weighed down this quarter by strong asset growth, and the common equity Tier 1 ratio of 10.3%, an increase of 40 basis points during the quarter, mainly driven by our common stock offering and growth in low-risk assets. Inclusive of our quarterly cash dividend payment of $0.25 a share, our tangible book value per share rose $2.12 in the quarter to $33.02, an increase of 23% in the past year. Going forward, based on our current pipelines, we expect loan and deposit growth of $1 billion to $1.5 billion per quarter, which will drive higher net interest income and PPNR growth.

Barring the company's strong fourth quarter performance and underlying fundamental trends, WAL earned net income of $192.5 million and earnings per share of $1.90 for the quarter, up $108 million year-over-year and nearly flat to Q4. This impressive loan growth drove net interest income of $317.3 million, or $2.5 million higher than last quarter and up 18% on a year-over-year basis. For the quarter, Western Alliance generated net income of $192.5 million or $1.90 per share, each down about 1% from the prior quarter. NIM declined 47 basis points to 337 basis points as our purposeful strong deposit growth in advance of closing the AmeriHome acquisition negatively impacted the margin by 43 basis points.

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We are clearly on our way back to full cruise operations with with 50 ships now serving guests as we end the fiscal year, and that's up from just one ship, one short a year ago. We've already returned over 65,000 crew members to our ships and thus resuming operations, over 1.2 million guests and counting and still we are [Phonetic] Now we've achieved that while delivering an exceptional guest experience with historically high net promoter scores. In fact, occupancies at our Carnival Cruise Line brand which currently operates and generates that are most similar to its normally [Indecipherable] generates are now approaching 90% and that's after the impact of the variants on near-term book. Total customer deposits have grown by over $1.2 billion from the prior year alone as our book position continues to build and to strength. Importantly, we ended the year with $9.4 billion of liquidity and as essentially the same liquidity level as last year, but with significantly improved cash flow generation ahead, as the aforementioned ship operating cash flows and [Indecipherable] continue to build, with 68% of our capacity now in operation and the remainder planned by spring, we are well positioned for our important summer season, where we historically have the lion's share of our operating profit. And to that end, we've achieved many important milestone along the way in our return service, or events, broadening our commitments to ESG with introduction of our 2030 sustainability goals and our 2050 aspiration, and that's building on the successful achievement of our 2020 goal, increase our ESG disclosure by incorporating SASB be and TCFD framework in our sustainability report, bolstering our compliance efforts with the addition of a new Board member with valuable compliance experience, a strong addition to our Board of Directors and our Board Compliance Committee, improving our culture through emphasizing essential behaviors and incorporating them into our ethos [Phonetic] through training and development and through every day real time feedback, as we are already among the most diverse companies in the world with a global employee base representing over 130 countries. And of course, there are many more operational milestones, such as reopening our eight owned and operated private destinations and port facilities, Princess [Indecipherable] Mahogany Bay, Amber Cove [Indecipherable] Santa Cruz de Tenerife and Barcelona, all delivering an exceptional experience to over 630,000 of the 1.2 million guests that's resuming. Now while the utilization of LNG is a positive step with the environment, so LNG is inherently 20% more carbon efficient. We have announced our net zero aspirations by 2050. Our decarbonization efforts have enabled us to peak our absolute carbon emissions way back in 2011, and that's despite an approximately 25% capacity growth since that time. And as a company with a 25% reduction in carbon intensity already under our belt, we are well positioned to achieve our 40% reduction goal by 200 and are working hard to reach that deliverable ahead of schedule. To name just a few, they include itinerary optimization and technology upgrades to or existing fleet and an investment of over $350 million in areas such as air conditioning, waste management lighting, and of course, the list goes on. Greater than 45% of our fleet is already equipped to connect the shore power and we plan to reach at least 60% by 2030. Now we helped develop the first port with show power capability for cruise ships, leading to the development of 21 ports to date and counting. Also, these efforts combined with the exit of 19 less efficient ships are forecasted to deliver upon return to full operation a 10% reduction in unit fuel consumption on an annualized base. Our strategic assist to accelerate the exit of 19 ships vessels with a more efficient and a more effective fleet overall and it's lowered our capacity growth to roughly 2.5% compounded annually from 2019 through 2025, now that's down from 4.5% annually pre COVID. A enjoy a further structural benefit to revenue from these enhanced guest experiences, new ship, due to the richer mix of premium price balcony cabins, which will increase 6 percentage points to 55% of our fleet in 2023. Now of course, as we mentioned before, we've also achieved a structural benefit to unit costs as we deliver these new, larger, more efficient ships, coupled with the exit of 19 less efficient ships, it will help generate a 4% reduction in ship level unit cost going forward, enabling us to deliver more revenue to the bottom line. Upon returning to full operation, nearly 50% of our capacity will consist of these newly delivered, larger, more efficient ships, expediting our return to profitability and improving our return on invested capital. And as we said we would, we maintain price despite the disruption, achieving 4% higher revenue per passenger cruise day in our fourth quarter than in the fourth quarter of 2019. In fact, the Carnival Cruise Line brand where we as I mentioned are able to offer more comparable itineraries to those in 2019 experienced its second consecutive quarter of double-digit revenue growth for the year, while improving occupancy with nearly 60% of its capacity returned to serve. I am so happy to report that our cash from operations turned positive in the month of November, ahead of our previous indication, driven by increases in customer deposits and other working capital changes. Over the next few months, we expect ship level cash contributions to grow as more ships return to service and as we build on our occupancy percentage. However, cash from operations and EBITDA over the next few months will be impacted by restart related spending and dry-dock expenses as 28 ships, almost a third of our fleet will be in dry-dock during the first half of fiscal 2022. Given all these factors combined, we expect both monthly cash from operations and monthly EBITDA to consistently turn positive during the second quarter of fiscal 2022. While we expect the net loss for the first half of 2022, it makes me feel so good to say we expect the profit for the second half of 2022. During the fourth quarter, we successfully restarted 22 ships. For the fourth quarter, occupancy was 58% across the ships in service and that was a 4 point improvement over the 54% we achieved last quarter during the peak summer season despite the slowdown in bookings just prior to the fourth quarter from the Delta variant. During the fourth quarter, we carried over 850,000 guests, which was 2.5 times the number of guests we carried in the third quarter. Revenue per passenger cruise day for the fourth quarter 2021 increased 4% compared to a strong 2019 despite the current constraints on itinerary offering. For those of you who are modeling our future results based on our planned restart schedule for fiscal 2022, available lower berth days or ALBDs as they are more commonly called, will be approximately $78 million. By quarter, the ALBDs will be for the first quarter $14.1 million. For the second quarter, $17.8 million. For the third quarter, $23 million even. And for the fourth quarter, $23.1 million. Fuel consumption will be approximately 2.9 million metric tons. The current blended spot price for fuel is $563 per metric ton. I did want to point out that due to the cost of a portion of our fleet being in pause status during the first half of 2022, restart related expenses, the cost of maintaining enhanced health and safety protocols and inflation, we are projecting net cruise costs without fuel per ALBD in 2022 to be significantly higher than 2019 despite the benefit we get from the 19 smaller less efficient ships leaving the fleet. In addition, we expect depreciation and amortization to be $2.4 billion for fiscal 2022, while net interest expense without any further refinancings is likely to be around $1.5 billion. Next, I'll provide a summary of our fourth quarter cash flows. During the fourth quarter 2021, our liquidity, increased by $1.6 billion to $9.4 billion at the end of the fourth quarter from $7.8 billion at the end of the third quarter. The increase in liquidity was driven by the $2 billion senior unsecured notes we issued in October to refinance 2022 maturities. The $360 million customer deposit increase added to the total. Completion of a loan we previously mentioned, supported by the Italian government, with some debt holiday principal refund payments added another $400 million. Working capital and other items net contributed $300 million. All these increases totaled $3.1 billion, which was somewhat offset by our cash burn of $1.5 billion. Simply, our monthly average cash burn rate of $510 million per month times 3. Our cumulative advance book position for the second half of 2022 and the first half of 2023 are at the higher end of historical ranges and at higher prices compared to 2019, with or without FCC's, but normalized for bundled packages. Booking volumes for the same period during the fourth quarter of 2021 were higher than the third quarter. As Arnold indicated, we entered 2022 with $9.4 billion of liquidity, essentially the same liquidity level as last year, but with significantly improved cash flow generation ahead as ship operating cash flows and customer deposits continue to build. Through our debt management efforts, we have refinanced $9 billion to date, reducing our future annual interest expense by approximately $400 million per year and extending maturities, optimizing our debt maturity profile. However, we will pursue refinancings to extend maturities and reduce interest expense at the right time.

Now of course, as we mentioned before, we've also achieved a structural benefit to unit costs as we deliver these new, larger, more efficient ships, coupled with the exit of 19 less efficient ships, it will help generate a 4% reduction in ship level unit cost going forward, enabling us to deliver more revenue to the bottom line. And as we said we would, we maintain price despite the disruption, achieving 4% higher revenue per passenger cruise day in our fourth quarter than in the fourth quarter of 2019. I am so happy to report that our cash from operations turned positive in the month of November, ahead of our previous indication, driven by increases in customer deposits and other working capital changes. Over the next few months, we expect ship level cash contributions to grow as more ships return to service and as we build on our occupancy percentage. Given all these factors combined, we expect both monthly cash from operations and monthly EBITDA to consistently turn positive during the second quarter of fiscal 2022. While we expect the net loss for the first half of 2022, it makes me feel so good to say we expect the profit for the second half of 2022. For the fourth quarter, occupancy was 58% across the ships in service and that was a 4 point improvement over the 54% we achieved last quarter during the peak summer season despite the slowdown in bookings just prior to the fourth quarter from the Delta variant. Revenue per passenger cruise day for the fourth quarter 2021 increased 4% compared to a strong 2019 despite the current constraints on itinerary offering. Next, I'll provide a summary of our fourth quarter cash flows. During the fourth quarter 2021, our liquidity, increased by $1.6 billion to $9.4 billion at the end of the fourth quarter from $7.8 billion at the end of the third quarter. All these increases totaled $3.1 billion, which was somewhat offset by our cash burn of $1.5 billion. Simply, our monthly average cash burn rate of $510 million per month times 3. Our cumulative advance book position for the second half of 2022 and the first half of 2023 are at the higher end of historical ranges and at higher prices compared to 2019, with or without FCC's, but normalized for bundled packages. Booking volumes for the same period during the fourth quarter of 2021 were higher than the third quarter. However, we will pursue refinancings to extend maturities and reduce interest expense at the right time.

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So recapping the quarter 4 performance around the world, starting with Asia Pacific. In India, initiatives to build omnichannel presence and marketing campaigns around key occasions by leveraging festivals and passion points through occasion-led marketing and integrated execution drove a sequential increase in market share and nearly 30% growth in transactions for the quarter. Additionally, our local Thums Up brand became $1 billion brand in India, driven by focused marketing and execution plans. Turkey, one of our key markets, grew 7 points of value share for the year in digital as total digital commerce expanded by close to 90%. In China, the Costa ready-to-drink expansion continued with availability now in more than 300,000 outlets, continuing to drive our share position ahead of our key competitor. Revenue per launch and gross profit per launch were up 30% and 25%, respectively, versus prior year. Additionally, to complement our World Without Waste goals, we announced a new global goal to reach 25% reusable packaging by 2030. Our Q4 organic revenue growth was 9%. Our price/mix of 10% was driven by a combination of factors, including targeted pricing, revenue growth management initiatives, as well as further improvement in away-from-home channels in many markets. Unit case growth showed further sequential improvement on a two-year basis, and concentrate sales lagged unit cases by 10 points in the quarter, primarily due to six fewer days in the quarter. This increase in marketing investments, along with some top-line pressure from six fewer days in the quarter, resulted in comparable operating margin compression of approximately 500 basis points for the quarter. For the full year, comparable operating margin was down approximately 100 basis points versus prior year as improved comparable gross margin was offset by the significant step-up in marketing. Importantly, versus 2019, a key measure we have focused on, comparable operating margin was up approximately 100 basis points. Fourth quarter comparable earnings per share of $0.45 was a decline of 5% year over year, resulting in full year comparable earnings per share of $2.32, an increase of 19% versus the prior year, as the strong resurgence in the business also benefited from a 3-point tailwind from currency and tax. We delivered strong free cash flow of $11.3 billion in 2021, with free cash flow conversion of approximately 115% and a dividend payout ratio well below our long-term target of 75%. We expect organic revenue growth of approximately 7% to 8%, and we expect comparable currency-neutral earnings-per-share growth of 8% to 10% versus 2021. Based on current rates and our hedge positions, we anticipate an approximate 3-point currency headwind to comparable revenue and an approximate 3 to 4 points currency headwind to comparable earnings per share for full year 2022. Additionally, due to a certain change in recent regulations, we estimate an effective tax rate increase from 18.6% in 2021 to 20% for 2022, which is an estimated 2 percentage points headwind to EPS. Therefore, all in, we expect comparable earnings-per-share growth of 5% to 6% versus 2021, including the combined 5- to 6-point headwind from currency and tax. We expect to generate approximately $10.5 billion of free cash flow over 2022 through approximately $12 billion in cash from operations, less approximately $1.5 billion in capital investments. This implies the fourth consecutive year of free cash flow conversion above our long-term range of 90% to 95%. Based on current rates and hedge positions, we continue to expect commodity price inflation to have a mid-single-digit impact on comparable cost of goods sold in 2022.

Our Q4 organic revenue growth was 9%. Fourth quarter comparable earnings per share of $0.45 was a decline of 5% year over year, resulting in full year comparable earnings per share of $2.32, an increase of 19% versus the prior year, as the strong resurgence in the business also benefited from a 3-point tailwind from currency and tax. We expect organic revenue growth of approximately 7% to 8%, and we expect comparable currency-neutral earnings-per-share growth of 8% to 10% versus 2021. Based on current rates and our hedge positions, we anticipate an approximate 3-point currency headwind to comparable revenue and an approximate 3 to 4 points currency headwind to comparable earnings per share for full year 2022. Therefore, all in, we expect comparable earnings-per-share growth of 5% to 6% versus 2021, including the combined 5- to 6-point headwind from currency and tax. Based on current rates and hedge positions, we continue to expect commodity price inflation to have a mid-single-digit impact on comparable cost of goods sold in 2022.

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As a reminder, we've entered the quiet period for the 3.45 gigahertz spectrum auction. In the third quarter, we reported earnings of $1.55 per share on a GAAP basis. Reported results include a net pre-tax gain on the sale of Verizon Media of $706 million and a net pre-tax charge of approximately $247 million, which includes a net charge of $144 million related to a mark-to-market adjustment for our pension liabilities and $103 million related to a severance charge for voluntary separations under our existing plans. Excluding the effect of these special items, adjusted earnings per share was $1.41 in the third quarter compared to $1.25 a year ago. Please note, our results include two months of Verizon Media as the sale to Apollo funds closed on September 1. We had a solid performance in the third quarter, growing total wireless service revenue by 3.9% year-over-year with earnings growth. We now expect total wireless service revenue growth of around 4%, which is on the high-end of our prior guidance. And adjusted earnings per share or $5.35 to $5.40, up from $5.25 to $5.35. On the commercial front, we've got great momentum in the 5G adoption with over 25% of our consumer phone base using a 5G capable device. For context, 12 months of the 4G launched, 10% of the devices were on 4G. Less than 12 months after 5G DSS launch, more than the double were on 5G devices, and it's growing at the rapid pace. In some or more established build outs, we're seeing more than 20% of usage of millimeter wave. And we are on track to have 5% to 10% of all traffic in the urban millimeter wave polygons by year end. And finally, we delivered significant value creation and strategy refinement with the sale of the Verizon Media Group in September depending TracFone acquisition and also the issuance of our third green bonds, which is a vital step toward our net-zero goal in 2035. EBITDA was up 3.3% year-over-year. And on an adjusted basis, earnings per share was up 12.8%. Consumer segment EBITDA increased by 2% driven by positive trends in customer acquisition, premium plan adoption, products and services and content as well as prepaid and reseller growth. We are on track to meet our fixed wireless access household coverage targets with an expected 15 million homes passed by the end of the year between 4G and 5G. To date, 5G Home is in 57 markets and the 4G LTE Home in over 200 markets across all 50 states. In the third quarter, consolidated total revenue was $32.9 billion, up 4.3% from prior year. Our results are inclusive of two months of Media revenue, which approximated $1.4 billion on a segment basis. Excluding Verizon Media, total revenue grew 5.5%. Our service and other revenue growth rate was 0.5% and 1.6% without Verizon Media. Equipment revenue growth was approximately 30% compared to the prior year, mainly due to the timing of iconic device launches and the continued pandemic recovery. Fios revenue was $3.2 billion, up 4.7% year-over-year, driven by continued growth in customers as well as our efforts to increase the value of each customer by encouraging them to step-up in speed test. Total wireless service revenue, which is the sum of consumer and business, was $17.1 billion, an increase of 3.9% over the prior year. Adjusted EBITDA in the third quarter was $12.3 billion, up 3.3% from prior year. For the quarter, adjusted earnings per share was $1.41, up year-over-year by 12.8%. For the quarter, we delivered 429,000 wireless retail postpaid phone net adds, up more than 50% from prior year and in line with 2019 levels. Phone churn for the quarter was 0.74%, well below pre-pandemic levels. Total broadband net adds, defined here as Fios, DSL and fixed wireless, were 129,000. Fios Internet net adds were 104,000 compared to 144,000 last year. Total revenue was $23.3 billion, up 7.3% year-over-year. Service and other revenue was $18.8 billion, an improvement of 2.5% versus prior year. Fios revenue was $2.9 billion, up 4.3% year-over-year, mainly driven by growth in our Internet base of approximately 400,000 or 6.2% over the past year and migration to higher speeds. Wireless service revenue was $14 billion, up 4% from the prior year. As a result of migrations and step-ups, over 30% of our account base is now on premium unlimited plans. For the quarter, EBITDA was $10.5 billion, up 2% year-over-year or more than $200 million, driven by a high quality service and other revenue gains coming from multiple growth vectors. Postpaid phone net adds were 267,000, above our Q3 performance in 2019 and 2020. Most importantly, we continue to be very pleased with the quality of customers we're adding with approximately 66% of new accounts taking a premium unlimited plan. And Q3 was another quarter in which we saw a strong acceleration in our 5G penetration, exiting the quarter with over 25% of our phone base now equipped with a 5G capable device, which is great progress in advance of our launch of 5G service on C-Band spectrum in the coming months. Fios Internet net adds were 98,000 for the quarter, up slightly from the prior quarter. Total revenues for the Business segment was $7.7 billion. Wireless service revenue was $3.1 billion, up 3.6% year-over-year. Business segment EBITDA was $1.9 billion, down 2.4% from the same quarter last year, and Business segment EBITDA margin was 24.8% in the quarter. Phone gross add volumes were above pre-pandemic levels, up 11.4% year-over-year and up 3% versus the same quarter in 2019. Total postpaid net adds for the quarter were 276,000. Despite this, we delivered postpaid phone net adds of 162,000. Year-to-date cash flow from operating activities totaled $31.2 billion. Year-to-date capital spending totaled $13.9 billion as we continue to support traffic growth on our 4G LTE network, while expanding the reach and capacity of our 5G Ultra Wideband network. C-Band capex was more than $1 billion through the third quarter. And we have placed orders for approximately $2 billion of related equipment year-to-date, giving us confidence that we will be within the previously guided incremental capex range of $2 billion to $3 billion for the year as we accelerate our C-Band deployment. The net result of cash flow from operations and capital spending is $17.3 billion of free cash flow for the nine month period. Net unsecured debt at quarter end was $131.6 billion, a $5.2 billion decrease versus the prior quarter. In addition to our third green bond issuance, we extended over $4.6 billion of near-term debt into a new 2032 maturity as we continue to optimize borrowing costs and our debt profile. Our net unsecured debt to adjusted EBITDA ratio was approximately 2.7 times. Our cash balance at the end of the quarter was $9.9 billion, which included the proceeds associated with our sale of Verizon Media Group. Wireless service revenue growth is now expected to be around 4%, the high-end of the prior guidance. Adjusted earnings per share guidance is being increased to $5.35 to $5.40, up from the prior range of $5.25 to $5.35. Capex guidance is also unchanged, though I'd note that our assumption for our BAU spend of $17.5 billion to $18.5 billion is dependent upon no material changes in the current state of our supply chain. As we look ahead, we'll continue to focus on expanding our 5G leadership, capitalizing on wireless momentum and work toward our C-Band launch, deploying differentiating experiences for our customers and execute our Network-as-a-Service strategy delivering all five vectors of growth.

In the third quarter, we reported earnings of $1.55 per share on a GAAP basis. Reported results include a net pre-tax gain on the sale of Verizon Media of $706 million and a net pre-tax charge of approximately $247 million, which includes a net charge of $144 million related to a mark-to-market adjustment for our pension liabilities and $103 million related to a severance charge for voluntary separations under our existing plans. Excluding the effect of these special items, adjusted earnings per share was $1.41 in the third quarter compared to $1.25 a year ago. Please note, our results include two months of Verizon Media as the sale to Apollo funds closed on September 1. We now expect total wireless service revenue growth of around 4%, which is on the high-end of our prior guidance. And adjusted earnings per share or $5.35 to $5.40, up from $5.25 to $5.35. In the third quarter, consolidated total revenue was $32.9 billion, up 4.3% from prior year. Excluding Verizon Media, total revenue grew 5.5%. For the quarter, adjusted earnings per share was $1.41, up year-over-year by 12.8%. Phone churn for the quarter was 0.74%, well below pre-pandemic levels. Wireless service revenue was $14 billion, up 4% from the prior year. Wireless service revenue growth is now expected to be around 4%, the high-end of the prior guidance. Adjusted earnings per share guidance is being increased to $5.35 to $5.40, up from the prior range of $5.25 to $5.35. Capex guidance is also unchanged, though I'd note that our assumption for our BAU spend of $17.5 billion to $18.5 billion is dependent upon no material changes in the current state of our supply chain. As we look ahead, we'll continue to focus on expanding our 5G leadership, capitalizing on wireless momentum and work toward our C-Band launch, deploying differentiating experiences for our customers and execute our Network-as-a-Service strategy delivering all five vectors of growth.

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Sales were $454 million in the quarter, an increase of 22% from the first quarter of last year and an increase of 18% at consistent translation rates. The effect of currency translation added 4 percentage points of growth or approximately $11 million in the first quarter. Reported net earnings totaled $105.7 million for the quarter or $0.61 per diluted share. After adjusting for the impact of excess tax benefits from stock option exercises, net earnings totaled $101.6 million or $0.58 per diluted share. Gross margin rates were strong in the quarter, up 120 basis points from the first quarter of last year as the favorable effects from currency translation, realized pricing and factory volumes were partially offset by the unfavorable impact on material costs and mix related to the significant growth in the lower margin contractor segment. Operating expenses increased $10 million in the quarter, including $2 million related to currency translation, $5 million of increases in sales and earnings based expenses and $2.5 million in new product development as we continue to invest in our growth initiatives. Other non-operating expenses decreased $5 million due to an improvement in the market valuation of investments held to fund certain retirement benefit liabilities. The effective tax rate was 16% for the quarter, which is 5 percentage points higher than the first quarter of last year, due to a decrease in excess tax benefits related to stock option exercises. Cash flows from operations totaled $102 million, compared to $54 million in the first quarter of last year. Capital expenditures were $21 million and dividends paid were $31.6 million. Based on current exchange rates, the effect of currency translation will continue to be a tailwind for us with the full year effect estimated to be 2% on sales and 5% on earnings with the most significant impact occurring in the first half of the year. We expect unallocated corporate expense to be approximately $30 million and can vary by quarter. Our 2021 full year tax rate is expected to be approximately 18% to 19%, excluding any effect from excess tax benefits related to stock option exercises. Capital expenditures are estimated to be $140 million, including $90 million for facility expansion projects. Finally, 2021 will be a 53 week year with the extra week occurring in the fourth quarter. Contractor continued strong performance with record Q1 sales and earnings as revenue growth in all regions exceeded 30% for the quarter.

Reported net earnings totaled $105.7 million for the quarter or $0.61 per diluted share. After adjusting for the impact of excess tax benefits from stock option exercises, net earnings totaled $101.6 million or $0.58 per diluted share.

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Despite the ongoing presence of the pandemic, we posted a strong quarter of organic sales growth of 4.7% versus Q1 2019. These trends give us confidence in achieving our guidance of 8% to 10% full year organic sales growth compared to 2019, which is equivalent to 12% to 14% organic versus 2020, despite one less selling day. During the quarter, our combined trauma and extremities business showed good resiliency, growing 2.6%, including Wright Medical compared to 2019 despite the ongoing impacts of COVID restrictions during the quarter. Our organic sales growth was 4.7% in the quarter. Compared to 2019, pricing in the quarter was unfavorable 1.4%. Versus Q1 2020, pricing was 0.9%, unfavorable. Foreign currency had a favorable 1.3% impact on sales. For the quarter, US organic sales increased by 1%, reflecting the continuing slowdown in elective procedures as a result of the pandemic, somewhat offset by strong demand for Mako, medical products, and neurovascular products. International organic sales showed strong growth of 15% and impacted by positive sales momentum in China, Japan, Australia, and Canada. Our adjusted quarterly earnings per share of $1.93 increased 2.7% from 2019, reflecting sales growth partially offset by higher interest charges resulting from the Wright acquisition as well as an overall disciplined ramp-up in operating costs. Our first quarter earnings per share was positively impacted from foreign currency by $0.03. Orthopaedics had constant currency sales growth of 17.2%, an organic sales decline of 0.7%, including an organic decline of 1.7% in the US. Other Ortho grew 49% in the US, primarily reflecting strong demand for our Mako robotic platform, partially offset by declines in bone cement. Internationally, Orthopaedics grew 1.5% organically, which reflects the COVID-19 related procedural slowdown in hips and knees, especially in Europe, offset by strong performances in Australia and Japan. For the quarter, our trauma and extremities business, which includes Wright Medical, delivered 2.6% growth on a comparable basis. In the US, comparable growth was 4.4%. In the quarter, MedSurg had constant currency and organic sales growth of 5.3%, which included 1.6% growth in the US. Instruments had a US organic sales decline of 3%, primarily impacted by continued procedural slowdown that impacted its power tool business, partially offset by gains in its waste management, smoke evacuation products, and services business. As a reminder, during the first quarter of 2019, Instruments had a very strong growth of approximately 18%. Endoscopy had a US organic sales decline of 5.7%, reflecting a slowdown in some of the capital businesses, which was partially offset by gains in our General Surgery, Video & Sports Medicine businesses, the latter of which grew over 11% in the quarter. The medical division had US organic sales growth of 13.6%, reflecting double-digit performance in its emergency care and Sage businesses. Internationally, MedSurg had an organic sales growth of 19.9%, reflecting strong growth across Europe, Canada, Australia and Japan in Medical, Endoscopy and Instruments. Neurotechnology and spine had constant currency and organic growth of 12.8%. This growth reflects double-digit performances in our Interventional spine, neurosurgical and ENT businesses and 27% growth in our neurovascular business. Our US Neurotech business posted an organic growth of 12%, reflecting strong product growth in our neuro powered drills, SonoPet IQ, bipolar forceps, Bio reabsorbs and nasal implants. Internationally, Neurotechnology and spine had organic growth of 31.7%. Our adjusted gross margin of 65.4% was unfavorable approximately 40 basis points from our first quarter 2019. Adjusted R&D spending was 6.8% of sales, reflecting our continued focus on innovation. Our adjusted SG&A was 35.2% of sales, which was unfavorable to the first quarter of 2019 by 70 basis points. In summary, for the quarter, our adjusted operating margin was 23.5% of sales, which is 160 basis points decline over the first quarter of 2019. We also reiterate our operating margin expansion guidance of 30 to 50 basis points improvement over 2019 operating margin, excluding the impact of Wright Medical. Our first quarter had an adjusted effective tax rate of 13%, given our mix of income. Given our current circumstances and the outlook for the full year, we would expect to be at the lower end of our range for the full year guided effective tax rate of 15.5% to 16.5%. Focusing on the balance sheet, we ended the first quarter with $2.3 billion of cash and marketable securities and total debt of $13.1 billion. During the quarter, we repaid $750 million of maturing debt. Our year-to-date cash from operations was approximately $450 million. This performance reflects the results of earnings, continued good management of working capital and approximately $170 million of one number expenditures related to the Wright Medical Integration. Based on our first quarter performance and the current operating environment, we continue to expect 2021 organic net sales growth to be in the range of 8% to 10%. If foreign currency exchange rates hold near current levels, we expect net sales in the full year will be positively impacted by approximately 1%. Net earnings per diluted share will be positively impacted by $0.05 to $0.10 in the full year, and this is included in our revised guidance range. Based on our first quarter performance and including consideration of our improved full year Wright Medical sales impact, disciplined cost management, and continued positive recovery outlook, we now expect adjusted net earnings per diluted share to be in the range of $9.05 to $9.30.

These trends give us confidence in achieving our guidance of 8% to 10% full year organic sales growth compared to 2019, which is equivalent to 12% to 14% organic versus 2020, despite one less selling day. Our organic sales growth was 4.7% in the quarter. For the quarter, US organic sales increased by 1%, reflecting the continuing slowdown in elective procedures as a result of the pandemic, somewhat offset by strong demand for Mako, medical products, and neurovascular products. Our adjusted quarterly earnings per share of $1.93 increased 2.7% from 2019, reflecting sales growth partially offset by higher interest charges resulting from the Wright acquisition as well as an overall disciplined ramp-up in operating costs. Based on our first quarter performance and the current operating environment, we continue to expect 2021 organic net sales growth to be in the range of 8% to 10%. If foreign currency exchange rates hold near current levels, we expect net sales in the full year will be positively impacted by approximately 1%. Based on our first quarter performance and including consideration of our improved full year Wright Medical sales impact, disciplined cost management, and continued positive recovery outlook, we now expect adjusted net earnings per diluted share to be in the range of $9.05 to $9.30.

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First quarter revenue was $390 million, which was above the guidance range of $330 million to $360 million and was also above the $271 million we saw in Q4 and the $292 million in Q1 of last year. Revenues were better than what we guided as we had a true-up in the quarter of about $20 million that relates to Q4 shipments, and we also had some recoveries in Q1 that came in sooner in the year than we thought. So the Q1 revenue of $390 million was composed of $373 million in licensing and $17 million in products and services. Broadcast represented about 37% of total licensing in the first quarter. Broadcast revenues increased by about 36% year-over-year, and that was driven by higher recoveries; higher adoption of Dolby, including our patent programs; and a higher true-up, which relates to the Q4 shipments. On a sequential basis, Broadcast was up by about 16%, driven by holiday seasonality for TVs, higher recoveries and higher adoption, offset partially by the lower set-top box activity. Mobile represented approximately 28% of total licensing in Q1. Mobile increased by a little over 200% from last year and about 170% from last quarter due primarily to timing of revenue under customer contracts and also helped by higher customer adoption. Consumer Electronics represented about 14% of total licensing in the first quarter. On a year-over-year basis, CE licensing was up by about 6%, mainly due to higher adoption of Dolby, including our patent programs. On a sequential basis, CE increased by about 52%, driven by higher seasonality, higher adoption in our patent programs and timing of revenue under contracts. PC represented about 9% of total licensing in Q1. PC was higher than last year by about 3% due to increased adoption of Dolby's premium technologies like Dolby Atmos and Dolby Vision. Sequentially, PC was up by about 5%, driven by higher adoption of those premium Dolby technology. Other Markets represented about 12% in total licensing in the first quarter. They were up by about 8% year-over-year, driven by higher gaming from new console releases and also from higher Via admin fees and via the patent pool program that we administer. On a sequential basis, Other Markets was up by about 33%, driven by higher revenue from gaming and from the Via admin fees. Beyond licensing, our products and services revenue was $16.9 million in Q1 compared to $14.3 million in Q4 and $34.2 million in last year's Q1. Total gross margin in the first quarter was 90.9% on a GAAP basis and 91.5% on a non-GAAP basis. Products and services gross margin on a GAAP basis was minus $5.5 million in Q1 compared to minus $15.5 million in the fourth quarter, and the fourth quarter included large excess of obsolete inventory charges because of our decision to exit the conferencing hardware arena. Products and services gross margin on a non-GAAP basis was minus $3.9 million in Q1 compared to minus $14.1 million in the fourth quarter. Operating expenses in the first quarter on a GAAP basis were $189.8 million compared to $198.7 million in Q4. The Q1 total includes $13.9 million of gain from sale of assets as we completed the disposition of our former Brisbane manufacturing site during the quarter. But it also includes $10 million of restructuring expense, primarily for severances and the related benefits, consistent with the comments that I made at the beginning of the quarter when I provided guidance. Operating expenses in the first quarter on a non-GAAP basis were $167.1 million compared to $176.5 million in the fourth quarter. Operating income in the first quarter was $164.7 million on a GAAP basis or 42.3% of revenue compared to $48.6 million or 16.6% of revenue in Q1 of last year. Operating income in the first quarter on a non-GAAP basis was $189.7 million or 48.7% of revenue compared to $74.1 million or 25.4% of revenue in Q1 of last year. Income tax in Q1 was 14.5% on a GAAP basis and 19.9% on a non-GAAP basis. Net income on a GAAP basis in the first quarter was $135.2 million or $1.30 per diluted share compared to $48.8 million or $0.47 per diluted share in last year's Q1. Net income on a non-GAAP basis in the first quarter was $153.3 million or $1.48 per diluted share compared to $65.5 million or $0.64 per diluted share in Q1 of last year. During the first quarter, we generated about $82 million in cash from operations, which compares to about $31 million generated from operations in last year's first quarter. And we ended the first quarter this year with about $1.2 billion in cash and investments. During the first quarter, we bought back about 500,000 shares of our common stock and ended the quarter with about $147 million of stock repurchase authorization still available to us. We also announced today a cash dividend of $0.22 per share. At that time, I said that for the first half of FY '21, we were anticipating year-over-year growth in licensing revenue from higher adoption of Dolby technologies, but we are also expecting year-over-year decline in products and services revenue because of the COVID impact on the cinema industry. Last quarter, I provided a Q2 revenue scenario of $270 million to $300 million for the quarter. Today, our scenario is that Q2 revenue could range from $280 million to $310 million. So if I combine the Q2 actual that we just reported with the Q2 outlook I mentioned a second ago, that would put our first half revenue outlook range at $670 million to $700 million compared to our previous outlook range of $600 million to $660 million. I already highlighted the revenue range of $280 million to $310 million in total, of which licensing would comprise $270 million to $295 million, while products and services would comprise $10 million to $15 million. Q2 gross margin on a GAAP basis is estimated to range from 88% to 89%, and the non-GAAP gross margin is estimated to range from 89% to 90%. Within that, products and services gross margin is estimated to range from minus $3 million to minus $4 million on a GAAP basis and from minus $2 million to minus $3 million on a non-GAAP basis. Operating expenses in Q2 on a GAAP basis are estimated to range from $200 million to $210 million. Operating expenses in Q2 on a non-GAAP basis are estimated to range from $175 million to $185 million, and the projected increase from Q1 is driven by the same comments I made about the GAAP operating expenses. Other income is projected to range from $1 million to $2 million for the quarter, and our effective tax rate for Q2 is projected to range from 20% to 21% on both a GAAP and non-GAAP basis. So based on the combination of the factors I just covered, we estimate that Q2 diluted earnings per share could range from $0.36 to $0.51 on a GAAP basis, and from $0.57 to $0.72 on a non-GAAP basis. HBO Max became the latest major streaming service to support the combined Dolby Vision and Dolby Atmos experience, starting with the release of Wonder Woman 1984. As Lewis said, the environment remains challenging across the industry. 12 new Dolby Cinema locations around the world were opened this quarter, including our first site in Taiwan. With the release of iPhone 12 at the beginning of the quarter, consumers can now record, share and enjoy their videos in Dolby Vision.

Net income on a GAAP basis in the first quarter was $135.2 million or $1.30 per diluted share compared to $48.8 million or $0.47 per diluted share in last year's Q1. Net income on a non-GAAP basis in the first quarter was $153.3 million or $1.48 per diluted share compared to $65.5 million or $0.64 per diluted share in Q1 of last year. At that time, I said that for the first half of FY '21, we were anticipating year-over-year growth in licensing revenue from higher adoption of Dolby technologies, but we are also expecting year-over-year decline in products and services revenue because of the COVID impact on the cinema industry. Today, our scenario is that Q2 revenue could range from $280 million to $310 million. I already highlighted the revenue range of $280 million to $310 million in total, of which licensing would comprise $270 million to $295 million, while products and services would comprise $10 million to $15 million. So based on the combination of the factors I just covered, we estimate that Q2 diluted earnings per share could range from $0.36 to $0.51 on a GAAP basis, and from $0.57 to $0.72 on a non-GAAP basis. As Lewis said, the environment remains challenging across the industry.

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Specifically, we require 100% of the crew to be fully vaccinated. The only exceptions are children under 12 and, in Florida, a minor number of people who choose not to get vaccinated. Excluding Singapore, which is a special case, an average of 92% of the people onboard our ships in July were fully vaccinated. Some of the key achievements include a 35% reduction in our greenhouse gas emissions from our 2005 baseline. We removed 60% of single-use plastics from our supply chain. 60% of our ships are equipped with emissions purification systems that remove 98% of sulfur oxides. We've reduced waste to landfill by 85% from our 2007 baseline. And we've also completed the introduction of over 2,000 certified tours in three assessments by the Global Sustainability Tourism Council. One interesting point is that our wind farm that spans 20,000 acres in Northern Kansas has 62 turbines with a total power generation capability of 200 megawatts. It will annually generate 760,000 megawatt-hours of carbon-free energy. That's saving some 500,000 tons in carbon. And to put it in perspective, it's the equivalent to the energy use of about 60,000 homes. The last 16 months have caused much pain and much suffering, but the tide is clearly turning. And as of today, our customer deposit balance is $2.5 billion. At this point, a little over 35% of our customer deposit balance is associated with FCCs, compared to about 45% at the time of our last call, signaling continued strong demand. On the liquidity front, we closed the second quarter with $5 billion in liquidity. These assets and attributes have been instrumental in helping us raise more than $13 billion of new capital since March of last year. And to that end, we successfully issued $650 million of senior unsecured notes at 4.25% and used those proceeds to redeem 7.25% senior secured notes in full. This will generate approximately $17 million of cash savings annually beginning in 2022. Now as it pertains to our debt maturities, our scheduled debt maturities for the remainder of this year and 2022 are $21 million and $2.2 billion. But as we sit today, there are guests sailing on 29 of our 60 ships in the Caribbean, Europe, Asia, Alaska, Iceland, and the Galapagos. As a result, we anticipate having about 65% of our fleet in service at the end of the third quarter and approximately 80% of the fleet back in operation by the end of the year. And we received about 50% more bookings in Q2 than during the previous three months, with trends improving one month to the next. By June, we were receiving about 90% more bookings each week when compared to Q1, with bookings for 2022 practically back to 2019 levels. This is evident in our fleet where several of our ships are now sailing with more than 50% load factors. Overall, the booking activity for 2021 sailings is consistent with our expected capacity and occupancy ramp-up at prices that are higher than 2019. It is still a bit early in the booking window to provide too much color for next year, but I will share that our booked load factors continue to be well within historical ranges at prices that are up nicely versus 2019, including the dilutive impact of FCCs. That being said, the first quarter is booked within historical ranges. We have been dreaming of this moment for more than 16 months, and it's finally here.

60% of our ships are equipped with emissions purification systems that remove 98% of sulfur oxides. Now as it pertains to our debt maturities, our scheduled debt maturities for the remainder of this year and 2022 are $21 million and $2.2 billion. As a result, we anticipate having about 65% of our fleet in service at the end of the third quarter and approximately 80% of the fleet back in operation by the end of the year. Overall, the booking activity for 2021 sailings is consistent with our expected capacity and occupancy ramp-up at prices that are higher than 2019. It is still a bit early in the booking window to provide too much color for next year, but I will share that our booked load factors continue to be well within historical ranges at prices that are up nicely versus 2019, including the dilutive impact of FCCs. That being said, the first quarter is booked within historical ranges.

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Our 40,000 restaurants in over 100 countries are predominantly run by local owner operators, connecting the business to the 40,000 communities in which we operate. Our third quarter topline results represent a continuation of our broad-based business momentum around the world with global comp sales, up nearly 13% or 10% on a two-year basis. Our International Operated Markets have continued to recover accelerating two-year comp trends in the third quarter to nearly 9% as most markets operated with fewer government restrictions. In Canada, the strong two-year comp momentum was driven by successful marketing activity, including core extensions like the Grand Mac and Spicy Nuggets and growth in the 3Ds of drive-thru delivery and digital. In the US, we maintained our momentum with Q3 comp sales, up nearly 10% or 14.6% on a two-year basis. Performance in the US remains driven by strong average check growth reflecting larger order sizes and menu price increases. Menu and marketing efforts with products like the Crispy Chicken Sandwich and successful Famous Orders like the Saweetie Meal have elevated our brand and help drive underlying sales growth across the business. In just a few short months, we already have over 1 million members enrolled with over 15 million active loyalty members earning rewards, and we expect that number to continue to grow. We've reopened nearly 80% of our dining rooms in the US, roughly 3,000 dining rooms remain closed in high risk COVID areas, as we continue to prioritize the health and safety of our customers and crew. Comp sales were up nearly 17% for the quarter, or about 5% on a two-year basis. Japan maintained momentum in Q3 with comps, up 13% achieving an impressive six consecutive years of quarterly comp sales growth, despite restaurants operating with government restrictions. While comps for the quarter were negative, the market continues to build its digital presence as they now have over 100 million active digital members. In addition, we've accelerated new restaurant growth in China, with over 500 new restaurants already opened this year, we now expect to open roughly 650 restaurants for the year, exceeding our original plan. In our top six markets over 20% of sales or about $13 billion year-to-date came through digital channels, whether it was through our app, kiosk in our restaurants or delivery. Over the past five years, our delivery footprint has grown from just 3,000 of our restaurants to more than 32,000 restaurants across 100 countries. Our strong performance for the quarter resulted in adjusted earnings per share of $2.76, which excludes the gain as we completed the partial divestiture of our ownership in McDonald's Japan. Our strong sales generated an increase in restaurant margins of about $500 million for the quarter. G&A increased about 20% in constant currencies for the quarter, driven by higher incentive-based compensation expense as a result of company performance exceeding our plan this year. We still expect G&A to be about 2.4% of systemwide sales for the full-year. Year-to-date adjusted operating margin was 44.3%, reflecting the improved restaurant margins across all segments and higher other operating income, compared to last year. Foreign currency translation benefited Q3 results by $0.04 per share. Based on current exchange rates, we expect currency to have a minimal impact on fourth quarter EPS, with an estimated full-year benefit of $0.21 to $0.23. And finally in September, our Board of Directors approved a 7% dividend increase to the equivalent of $5.52 annually. Among our goals were to sustainably source 100% of key ingredients, including coffee and beef. Just this past September, we announced that we would reduce the use of conventional virgin plastics and Happy Meal Toys by 90% by 2025. We recently announced our ambition to achieve net zero emissions across global operations by 2050 and we joined the UN Race to zero.

In Canada, the strong two-year comp momentum was driven by successful marketing activity, including core extensions like the Grand Mac and Spicy Nuggets and growth in the 3Ds of drive-thru delivery and digital. Performance in the US remains driven by strong average check growth reflecting larger order sizes and menu price increases. Menu and marketing efforts with products like the Crispy Chicken Sandwich and successful Famous Orders like the Saweetie Meal have elevated our brand and help drive underlying sales growth across the business. Our strong performance for the quarter resulted in adjusted earnings per share of $2.76, which excludes the gain as we completed the partial divestiture of our ownership in McDonald's Japan.

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This quarter, we earned $1.6 billion after-tax or $5.04 per share. This improved economic view, combined with lower loan balances and continued strong credit performance, were the primary drivers of $879 million reserve release in the quarter. As discussed in previous quarters, the strong credit performance was accompanied by elevated payment rates that continue to put pressure on loan balances, which were down 7% year-over-year. Payment rates were over 350 basis points higher than last year and at their highest level since the year 2000. First, there has been a significant increase in sales volume, up 11% from a year ago and up 15% from the first quarter of 2019. On the payment side, we had continued strong performance in our PULSE business, with volumes up 23%, driven by stimulus payments in the first quarter and higher average spend per transaction. This quarter, we restarted our share repurchase program with $119 million in buybacks, in line with the regulatory restrictions still in place. Revenue, net of interest expense, decreased 3% from the prior year, mainly from lower net interest income. This was driven by a 7% decline in average receivables and lower market rates, partially offset by a reduction in funding costs as we continued to manage deposit pricing and optimize our funding mix. Non-interest income was 5% lower, primarily due to a $35 million net gain from the sale of an equity investment in the prior year. Consistent with our excellent credit quality, lower loan fee income reflects a decline in late fees, while net discount and interchange revenue was up 12% from the prior year, reflecting the increased sales volume. The provision for credit losses was $2 billion lower than the prior year, mainly due to an $879 million reserve release in the current quarter, compared to a $1.1 billion reserve build in the prior year. Additionally, net charge-offs decreased 30% or $232 million in the prior year. Operating expenses decreased 7% year-over-year as we remain disciplined on expense management. Other than compensation, all other expenses were down from the prior year, led by marketing, which decreased 33% year-over-year. Total loans were down 7% from the prior year, driven by a 9% decrease in card receivables. As a result, these balances were approximately 300 basis points lower than the prior year. Organic student loans increased 5% from the prior year and originations returned to pre-pandemic levels. Personal loans were down 9%, primarily due to the actions we took early in the pandemic to minimize credit loss. The net interest margin was 10.75%, up 54 basis points from the prior year and 12 basis points sequentially. Compared to the prior quarter, the improvement in net interest margin was driven by lower deposit pricing as we cut our online savings rates from 50 basis points to 40 basis points during the quarter. Our funding from consumer deposits is now at 65%. Average consumer deposits were up 14% year-over-year and flat to the prior quarter. Consumer CDs were down 7% from the prior quarter, while savings and money market increased 4%. Total non-interest income was $465 million, down $25 million, or 5% year-over-year, driven by the one-time gain in the prior year that I previously mentioned. Excluding this, non-interest income was up 2%. Net discount and interchange revenue increased 12% as revenue from higher sales volume was partially offset by higher rewards cost. Total operating expenses are down $78 million, or 7% from the prior year. Marketing and business development decreased $77 million, or 33% year-over-year. Partially offsetting the favorability was a $39 million increase in employment compensation, that was driven by two factors: $22 million from a higher bonus accrual in the current year. The total charge-offs were 2.5%, down 79 basis points year-over-year and up 10 basis points sequentially. The card net charge-off rate was 2.8%, 85 basis points lower than the prior year with the net charge-offs dollars down $209 million, or 31%. Sequentially, the card net charge-off rate increased 17 basis points and net charge-off dollars were up $11 million. The card 30-plus delinquency rate was 1.85%, down 77 basis points from the prior year and 22 basis points lower sequentially. Net charge-offs were down 15 basis points year-over-year and 18 basis points compared to the prior quarter. The 30-plus delinquency rate improved 55 basis points from the prior year and 19 basis points sequentially. In personal loans, net charge-offs were down 79 basis points year-over-year with a 30-plus delinquency rate down 47 basis points from the prior year and 24 basis points from the prior quarter. This quarter, we released $879 million from the allowance. Our assumptions on unemployment for a year-end 2021 rate of 6%, with a return to full employment in late 2023, we assume GDP growth of about 4.6%. Our common equity Tier 1 ratio increased 180 basis points sequentially to 14.9%, well above our internal target of 10.5%. We have continued to fund our quarterly dividend at $0.44 per share and repurchased $119 million of common stock during the quarter. Our Board of Directors previously authorized up to $1.1 billion of repurchases. As I mentioned earlier, we continue to optimize our funding mix and consumer deposits now make up 65% of total funding. Our goal remains to have 70% to 80% of our funding from deposits, which we feel is achievable. We released $879 million of reserves.

This quarter, we earned $1.6 billion after-tax or $5.04 per share. Revenue, net of interest expense, decreased 3% from the prior year, mainly from lower net interest income. The provision for credit losses was $2 billion lower than the prior year, mainly due to an $879 million reserve release in the current quarter, compared to a $1.1 billion reserve build in the prior year.

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We had adjusted EBITDA of $35.1 million this quarter on sales that were up 48% to $450 million. This quarter's adjusted EBITDA has been exceeded only twice in any quarter since 2014, and one of those occurred just last period when we posted $37 million of adjusted EBITDA. We are now expecting to see our full year adjusted EBITDA coming in above $130 million, which is our highest annual total since 2013. So looking at our segments, Titan, again, this quarter experienced strong sales growth in each of our segments, with agriculture leading the way with a 60% increase compared to last year. Our order books continue to strengthen, especially on the ag side, where commodity prices remained at good levels with corn above $5, soybean above $12 and cotton at record highs, thus ensuring another year of farmer incomes, strong farmer incomes for 2022. We have seen demand continue to be above our expectations that we had at the start of the year with sales growth of this quarter of 36% on a year-over-year basis. Titan, in addition to our solid operation results again this quarter and really for all of 2021 for that matter, Titan has strengthened our financial position this year by refinancing our $400 million bonds. There are continuing positive signs in our end markets, which puts Titan in a good position, as I stated earlier, to post adjusted 2021 adjusted EBITDA of over $130 million. And has all this positive going on, yet our stock is trading at only around 6.5 times current year adjusted EBITDA. Sales grew at a very nice clip at 48% this quarter. Our growth was led by the Ag segment with a 60% increase from Q3 last year. And at the same time, the EMC segment was also very strong at a growth of 37%, and our growth in the consumer segment was nothing to sneeze at, with an increase of 32%. Our gross profit increased by 93% in the quarter, and our margin improved to 13.4% compared to only 10.3% last year. Adjusted EBITDA for the quarter was $35 million, representing the strongest third quarter performance since 2013 that bears repeating. On a trailing 12-month basis, our adjusted EBITDA stands at $116 million as of this quarter, and we expect Q4 performance to be strong, improving that run rate to over $130 million for fiscal 2021. Our cash position remained stable again this quarter at $95 million despite some growth in working capital. With our improvement in profitability and our strong management of the balance sheet, our debt -- our net debt leverage as of the end of Q3 stands at 3.3 times our trailing 12-month adjusted EBITDA. Again, our sales levels for the third quarter were strong, and we saw another sequential increase of 2.5%, notwithstanding the normal seasonal variation from holidays and plant maintenance that reduces our production days. Sales increased relative to last year by $146 million and $104 million or 30% from the third quarter of 2019, a more normal third quarter period. Volume was up over 25% with all of our business units, except Australia, seeing significant double-digit percentage growth year-over-year. Gross profit for Q3 was $60 million versus only $31 million in adjusted gross profit in the third quarter of last year. Our gross profit margin in the third quarter, again, was very strong at 13.4%. Our Ag segment net sales were $244 million, an increase of $91 million or 60% from third quarter last year, which makes it the strongest quarter for the segment in the last eight years, beating last quarter sales by 5.5%, reflecting strength in North America and Latin America. Volume in the segment was up 30% -- 36% just like Q2. Our agricultural segment gross profit in the third quarter was $33 million, up from only $16 million last year, representing a 105% improvement. Our gross margins in Ag were 13.6%, which is another significant improvement from the margin produced last year of 10.6%. Overall net sales for the EMC segment grew by $45 million or 37% from last year as well. All of the major geographies experienced year-over-year growth during the quarter with the largest growth coming from ITM, our undercarriage business, which grew 38% from third quarter last year. Gross profit within our Earthmoving and Construction segment for the third quarter was $21 million, which represents an improvement of $9 million or 71% from gross profit last year. Gross profit margin in the EMC segment was 12.7% versus only 10.1% last year, a very healthy increase. The Consumer segment's Q3 net sales were up 32% or nine million compared to last year. As we discussed, our primary priorities -- production priorities have been with our Ag and the EMC segments and our customers, but we did see healthy increases related to our Latin American utility truck tire business and increased mixed stock rubber sales in the U.S. The segment's gross profit for the third quarter was 5.8%, a very healthy improvement from last year as well. Gross margins were at 15%, which was an improvement from 9.5% last year, reflecting some positive mix and pricing improvements with our products. Our SG&A and R&D expenses for the third quarter were $34.6 million, down about $0.5 million sequentially from the second quarter. Most importantly, SG&A and R&D expense was 7.7% of third quarter sales, a very nice improvement from a year ago. During the third quarter, we recorded tax expense of $5.3 million, somewhat higher than in the quarter than originally expected, but reflective of increased profitability in certain high tax jurisdictions for Titan, including Latin America, Turkey, Germany and parts of Asia. I now expect taxes on the income to be about approximately $15 million for the year. Our overall cash balances remained solid in the quarter at $95 million. Our operating cash flow for the quarter was positive at $15 million, and we generated positive free cash flow of over $5 million in the quarter. During the third quarter, inventory grew by approximately $28 million sequentially from Q2. As a percentage of the most recent quarterly sales, inventory stands at 20.7%. This compares favorably to 23% -- over 23% from a year ago at this time. Our overall DSOs in the business improved sequentially from Q2 by two days and now stands at 53 days compared to 55 in Q2 and 58 from this very time last year. capex for the quarter was up sequentially at $9.6 million as expected. As of the first nine months, we -- capex stands at $24 million. Based on our latest forecast, I expect full year 2021 capital investments of around $35 million at the low end of the previous estimate for the year. The credit facility was increased to $125 million and is extended until October of 2026. It still has the option to expand by another $50 million through -- in an accordion provision. Our borrowings on the ABL stands at $30 million, roughly in line with last quarter. Overall, net debt decreased in the quarter about -- to $387 million, down $4 million from last quarter. I stated it earlier, but it bears repeating that our debt leverage at the end of September based on 12 -- trailing 12 months adjusted EBITDA has decreased to 3.3 times, which is right in the target range that we have been discussing.

We had adjusted EBITDA of $35.1 million this quarter on sales that were up 48% to $450 million. We are now expecting to see our full year adjusted EBITDA coming in above $130 million, which is our highest annual total since 2013. There are continuing positive signs in our end markets, which puts Titan in a good position, as I stated earlier, to post adjusted 2021 adjusted EBITDA of over $130 million. Sales grew at a very nice clip at 48% this quarter. On a trailing 12-month basis, our adjusted EBITDA stands at $116 million as of this quarter, and we expect Q4 performance to be strong, improving that run rate to over $130 million for fiscal 2021.

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F.N.B. second quarter earnings per share totaled $0.31, representing an 11% increase on a linked-quarter basis. Operating net income reached a record $101 million and total revenue increased to $308. Our performance resulted in a return on tangible common equity of 16% and growth in tangible book value per share to $8.20, an increase of $0.19 or 2%. The quarter's efficiency ratio of 56.8% improved due to the benefit of increased revenue and continued expense discipline as we achieved the 2021 operating cost savings floor of $20 million. Our company remains well capitalized with an estimated CET1 ratio of 10.02% for the second quarter. On a year-to-date basis, wealth management revenues increased over 6 million, as total wealth management and insurance revenues increased 26% and 8% respectively. Looking at the balance sheet, on an annualized linked-quarter basis, F.N.B. demonstrated strong fundamental performance as we saw a pickup in lending activity that translated into a significant spot loan growth of 9% when excluding the impact of PPP loan. Non-interest bearing deposits grew to $10.2 billion at June 30 and now comprise a third of total deposits. This brings our loan-to-deposit ratio to 82.4% providing F.N.B. with ample liquidity and a favorable funding mix moving forward. The level of delinquency excluding PPP balances ended June at 80 bps, a 9 basis point improvement linked quarter, which was driven by broad improvements across all portfolios, notably commercial and [Indecipherable]. The level of NPLs and OREO also improved to end the quarter at 58 basis points, representing a 14 basis point decrease from the prior quarter's ex-PPP level. Our NPLs decreased meaningfully down nearly $30 million during the quarter, which was driven primarily by a $21 million reduction in the commercial portfolio, including the resolution of a credit that was previously reserved for. Net charge-offs for the quarter were very low at $3.8 million or 6 basis points annualized. While year-to-date net charge-offs remained at a very solid 9 bps annualized. Non-GAAP net charge-offs excluding PPP balances were 7 bps and 10 bps for the quarter and year respectively. We recognized a $1.1 million net benefit in provision this quarter following broadly improving economic activity and positive credit quality results through June, resulting in a stable reserve position at 1.42% while the ex-PPP reserve stands at 1.51%. NPL coverage also remains very favorable at 278% due to reduced NPL levels during the quarter. Our total ending reserve position inclusive of acquired unamortized discounts totals 1.58%. I think quickly on loan deferrals, we ended June at a level of 0.7% of our core loan portfolio with these levels continuing to decline as new requests have essentially ceased and borrowers returned to contractual payment schedules. We made significant progress working down rated credits as indicated by a 15% reduction in classifieds, reflecting the tireless efforts put forth by our work out teams to reduce exposure to more sensitive industries and take risk off the table as economic conditions continue to improve. As noted on Slide 5, first quarter earnings per share increased to $0.31,, up significantly from the prior and year ago quarters. Looking at highlights for the quarter, on an operating basis, net income available to common stockholders increased $18.3 million or 22% to a record $101.5 million as total revenue increased $2.1 million or 0.7%. Operating expenses were well controlled, down $5 million linked quarter. Linked quarter growth and operating PPNR of $7 million or 6% reflects the company's strong performance in the quarter even without provision benefit. Period-end loan balances excluding PPP increased $515 million or 9.1% annualized on a linked quarter basis. On an average balance basis, total loans decreased $56 million reflecting accelerated PPP forgiveness during the second quarter. On the deposit side, average deposits increased $1.1 billion or 3.9% to over $30 billion, a record high with non-interest bearing deposits comprising 33% of total deposits. Net interest income increased $5 million to $227.9 million as the PPP contribution increased $2.2 million -- $25 million [Phonetic], which was offset by $1.9 million decreased contribution of purchase accounting accretion to $5.0 million. The underlying net interest income trends improved due to a more favorable balance sheet mix and our continued focus on reducing deposit costs in the lower interest rate environment was evidenced by our total cost of interest bearing deposits declining 7 basis points to 24 basis points. Reported net interest margin decreased 5 basis points to 2.70% as earning asset yield declined 9 basis points, which was partially offset by the 6 basis point reduction in the cost of funds. The yield on total loans and leases remain stable at 3.51%. When excluding the higher cash balances, purchase accounting accretion and PPP impacts, the underlying net interest margin would be 2.71%, representing a 1 basis point increase compared to the first quarter 2021 and the second quarter in a row of improving underlying net interest margin. Let's now look at non-interest income and expense on Slides 9 and 10. Non-interest income totaled $80 million decreasing $3 million from record levels last quarter. We achieved record wealth management revenue of $15 million through contributions across the geographic footprint and positive market impacts on assets under management. SBA volume and average size of transactions increased during the quarter, driving SBA premium revenues to $2.6 million almost double the prior quarter. Mortgage banking operations income decreased $8.3 million as gain on sale margins tightened meaningfully in the second quarter 2021 throughout the industry. Held for sale pipeline declined significantly elevated levels and the benefit for mortgage servicing rights impairment valuation recovery was $2.2 million lower than last quarter. Non-interest expense decreased $2.4 million linked quarter on a reported basis. When excluding $2.6 million of branch consolidation costs in the quarter, non-interest expense decreased $5 million or 2.7%. On an operating basis, salaries and employee benefits decreased %5.3 million or 4.9%, primarily related to the timing of normal annual long-term stock awards recognized in the first quarter each year. Outside services expenses increased $1.8 million reflecting increases from third-party technology providers, legal costs and other consulting engagements. We are very pleased with this quarter's results with record operating net income, accelerating sequential loan growth, strong revenue growth, solid credit quality metrics, continued growth in tangible book value per share, increasing $0.19 per share to $8.20. Our current thinking is that we will see around $500 million of forgiveness in the third quarter, which would translate into a $79 million reduction in net interest income contribution from PPP loans. We expect non-interest income to be in the high $70 million area given the diversified nature of our non-interest income revenue streams. With the Howard merger, we will grow to the number 6 deposit share in the Baltimore MSA, while adding meaningful customer density to the Mid-Atlantic region, which covers Maryland, Washington DC and Northern Virginia. If you look at our market expansion strategy in the Mid-Atlantic, our four acquisitions since 2013 came in a lower relative acquisition cost with a weighted average price to tangible book of 1.5 times. Our growth strategy in the Mid-Atlantic region provided access to a population of 10 million and more than 300,000 businesses with revenue greater than 100,000. Since the end of 2015, our compounded annual organic loan growth for F.N.B in Maryland is 15%. Furthermore, as a company overall, we have nearly doubled our annual non-interest income since 2015 from $162 million to $294 million, most of which has to do with our investment in products and services, but also bringing those capabilities into our expansion markets and broadening our client relationships. The Howard franchise increases F.N.B. Baltimore deposits by $1.7 billion to $3.5 billion on a pro forma basis, while creating a combined organization of more than $41 billion in total assets. We view the transaction as financially attractive with a 4% earnings per share accretion with fully phased-in cost savings and enhanced pro forma profitability metrics, which included 200 basis point improvement in the efficiency ratio and an internal rate of return greater than 25%. Consistent with our approach to capital management, the transaction is expected to be neutral to CET1 at closing and includes minimal tangible book value dilution of 2%. As I noted earlier, our TBV growth this quarter alone was 2%, essentially earning the TBV dilution back in one quarter.

F.N.B. second quarter earnings per share totaled $0.31, representing an 11% increase on a linked-quarter basis. Operating net income reached a record $101 million and total revenue increased to $308. As noted on Slide 5, first quarter earnings per share increased to $0.31,, up significantly from the prior and year ago quarters. Net interest income increased $5 million to $227.9 million as the PPP contribution increased $2.2 million -- $25 million [Phonetic], which was offset by $1.9 million decreased contribution of purchase accounting accretion to $5.0 million.

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We have continued to increase our rate of production -- production weekly and are now operating at about 90% of prior-year levels. For the entire La-Z-Boy Furniture Gallery network, which accounts for about half of our wholesale business, written same-store sales increased 14.8% in the first quarter. And to provide some additional perspective on the quarter, the cadence or written same-store sales by month was a decline of 13% in May, an increases of 30% in June and 32% in July. These COVID-19 related closures and reopenings transferred to a 31% sales decline versus a year ago to $285 million for the quarter with GAAP operating income declining to $4 million and non-GAAP operating income to $9 million. We are still -- we were still however able to generate $106 million in operating cash supported partially by strong customer deposits and end the quarter with a balance sheet that remains strong. On a sales decline of 30% to $224 million [Phonetic], non-GAAP operating margin was 9.4%, principally the result of the decline in production for the period and the consequent lower absorption of our fixed cost, partially offset by temporary cost reduction actions related to our COVID-19 action plan, which we announced in March. Written sales for the Wholesale segment were up 2.5% for the quarter with a decline of 38% in May, more than offset by increases of 29% in both June and July, respectively. Written same-store sales for the Company-owned stores increased 11% for the quarter, even with the majority of stores closed for the month of May and some and still closed in June. Again for perspective on how the quarter played out by month, written same-store sales for the Company-owned stores were down 26% in May, but up 29% and 37% in June and July, respectively. For the quarter, delivered sales declined 36% to $91 million and non-GAAP operating margin for the segment was a loss of 6.8% due primarily to our inability to increase our production fast enough to meet the unexpected momentum in demand. For the quarter, Joybird sales reported in Corporate & Other declined 22% to $13.4 million. However, written sales increased 38%. We expect quarter 2 delivered revenue rate to be restored to more normal levels, but anticipate it will continue to lag the strong written demand due to the short-term labor constraints. Last year's first quarter non-GAAP results excluded a pre-tax charge of $1.5 million or $0.02 per diluted share related to the Company's supply chain optimization initiatives, which included the closure of our Redlands, California facility and a pre-tax purchase accounting charge of $1.5 million or $0.02 per diluted share. As noted, on a consolidated basis fiscal '21 first quarter sales declined 31% to $285 million reflecting the continued impact from the COVID-19 pandemic. Consolidated non-GAAP operating income was $9 million versus $26 million in last year's quarter and consolidated non-GAAP operating margin was 3.1% versus 6.3%. Non-GAAP earnings per share was $0.18 per diluted share in the current quarter versus $0.42 in last year's first quarter. Consolidated gross margin for the first quarter increased 30 basis points. SG&A as a percent of sales increased 350 basis points reflecting the decline in sales relative to fixed costs. On a GAAP basis, our effective tax rate for fiscal '21 first quarter was 19.8% versus 22% in last year's first quarter. Our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes. Absent discrete adjustments, the effective tax rate for fiscal '21 first quarter would have been 26.1%. For fiscal year '21, absent discrete items, we continue to estimate our effective tax rate on a GAAP basis, will be in the range of 25% to 26%. Turning to cash, we generated $106 million in cash from operating activities in the quarter, including a $61 million increase in customer deposits from written orders for the Company's retail segment and Joybird. We ended the quarter with $337 million in cash, including $50 million in cash proactively drawn on the Company's credit facility to enhance liquidity and response to COVID-19 back in March, compared with $114 million in cash at the end of last year's first quarter. We also held $16 million in investments to enhance returns on cash, compared with $33 million last year. During the quarter, we repaid $25 million of the original $75 million drawn against our credit line based on business performance and ongoing liquidity. Also during the quarter, we invested $10 million in capital, primarily related to machinery and equipment, upgrades to our Dayton manufacturing facility and investments in our retail stores. We expect capital expenditures to be in the range of $40 million to $45 million for the fiscal year, although spending will be largely dependent on economic conditions, continued business recovery and liquidity trends. We are pleased to announce -- we have announced that -- we are pleased to announce that yesterday, our Board of Directors elected to reinstate a regular quarterly dividend to shareholders of $0.07 per share. This is 50% of the quarterly dividend amount paid prior to the pandemic, as we continue to monitor current business trends and remain vigilant with respect to the ongoing macroeconomic uncertainty. There are currently 4.5 million shares of purchase availability under our authorized program. First, a reminder that our expected non-GAAP adjustments will continue to include purchase accounting adjustments for acquisitions to date, which are estimated to be in the range of $0.04 to $0.05 for the full year. And we anticipate pre-tax charges of $0.01 to $0.02 per share in the second quarter related to the completion of our recent business realignment, which included the closure of the Newton assembly plant and the 10% reduction in our global workforce.

For the entire La-Z-Boy Furniture Gallery network, which accounts for about half of our wholesale business, written same-store sales increased 14.8% in the first quarter. Non-GAAP earnings per share was $0.18 per diluted share in the current quarter versus $0.42 in last year's first quarter.

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With respect to market share capture, we're sustaining growth rates that are at or above our long range target of growth, at least 400 basis points above the industrial production index. Our fiscal second quarter average daily sales growth rate of 7.9%, does not do justice to the momentum that we see developing. Therefore, the absolute sales growth rate of 11.4% is more indicative of underlying performance. February was particularly strong at nearly 18%, with a catch up from the soft January. Implant continues its strong momentum and now represents approximately 9% of company sales. We're tracking ahead of plan, which targeted 10% of total company sales by the end of fiscal '23. E-commerce reached 60.7% of total company sales, up 150 basis points from prior year and 30 basis points from the prior quarter. We were able to save the customer over $1.2 million on an annualized basis, by recommending alternate tooling that yielded faster metal removal rates, shorter lead times, and increased productivity with a more cost effective tool. You may have seen that we were recently awarded a five year contract to service 10 U.S. Marine Corps bases across the continental United States, Hawaii, and Japan. And we said we would achieve this by leveraging growth, by executing on gross margin initiatives, and by delivering structural cost takeout of at least $100 million, helping to reduce opex as a percentage of sales by at least 200 basis points from our fiscal 2019 baseline. Price realization thus far has been strong, and as a result, Q2 gross margins came in at 42.5%. We also generated strong operating expense leverage and reduced adjusted opex as a percentage of sales by 80 basis points versus prior year. We delivered $6 million of savings in the second quarter and remain on track for $25 million in expected cost savings for the fiscal year. And we remain on pace to achieve our goal of at least $100 million in total cost savings by the end of fiscal '23. While these conditions create some challenges for us here at MSC, they also provide opportunities to take additional market share from the 70% of the distribution market that's made up of local and regional distributors. Our second quarter sales came in at $863 million. As Erik mentioned, given the extra two days this year coming with minimal sales, the total sales growth of 11.4% over the prior year period is more reflective of our real growth. On an average daily sales basis, Q2 growth was 7.9%. Our non-safety and non-janitorial product lines grew just over 10% on an ADS basis, and sales of safety and janitorial products declined roughly 3%. Government sales declined roughly 11%, due to the difficult janitorial and safety comps. This is a large improvement from Q1's decline of nearly 30%, and we expect the comps to ease further in the back half of fiscal 2022. We're continuing to see strong execution and growth initiatives with vending and plant and mscdirect.com, each growing roughly 100 basis points or more, as a percent of total company sales versus the prior year. As Erik mentioned, our fiscal Q2 gross margin was 42.5%, up 90 basis points sequentially from our first quarter, and up 440 basis points from last year's fiscal Q2. As you may recall included in last year's Q2 gross margin was a $30 million PPE related write down. Excluding this write down, our prior year Q2 adjusted gross margin was 42%, 50 basis points below the current year quarter. Reported and adjusted operating expenses in the second quarter were $266 million, or 30.8% of sales. Last year reported operating expenses were $245.1 million, and adjusted operating expenses were $244.4, or 31.6% of sales. This represents an 80 basis point reduction in adjusted opex to sales. We incurred approximately $3.1 million of restructuring and other costs in the quarter, as compared to $21.6 million in the prior year quarter. Our operating margin was 11.3%, compared to 3.6% in the same period last year. Excluding the restructuring and other costs and the PPE related inventory write down in the prior year, our adjusted operating margin was 11.6% versus an adjusted 10.4% in the prior year period, a 120 basis point improvement. On the adjusted incremental margin front for second quarter came in at just over 22% ahead of our initial fiscal 2022 goal. Earnings per share were $1.25 as compared to $0.32 in the same period prior year. Adjusted earnings per share were $1.29 as compared to adjusted earnings per share of a $1.03 in the prior year period, an increase of 25%. Turning to the balance sheet, you can see that as of the end of our fiscal second quarter, we were carrying $658 million of inventory, up $35 million from Q1 balance of $623 million. Our capital expenditures were $16 million in the second quarter. Moving ahead to Slide 7, you can see the uses of working capital also impacts our free cash flow, which came in slightly negative for the second quarter as compared to $4 million in the prior year quarter. We do expect cash conversion to improve in the second half of fiscal 2022, and for the fiscal 2022 full year to come in at approximately 70% to 80%, roughly comparable with historical periods of Southwest. Our total debt at the end of the fiscal second quarter was $835 million, which reflects a $72 million increase from our first quarter. As for the composition of our debt, $285 million was on our revolving credit facility, about $200 million was under our uncommitted facilities, approximately $300 million with long-term fixed rate borrowings, and $50 million were short-term fixed rate borrowings. Our cash and cash equivalents were $42 million, resulting in net debt of $794 million at the end of the quarter, up from $700 million at the end of the first quarter. You may recall that our updated cost savings goal for fiscal 2023 is a minimum of $100 million versus our fiscal 2019 cost base. As you can see on Slide 8, our cumulative savings for fiscal 2021 were $60 million, and we also invested roughly $22 million over that same period. For the full year fiscal 2022, we expect additional gross savings of $25 million, and additional investments of $15 million. We've made excellent progress toward this goal in the first half, as we've achieved $16 million of gross savings and invested $11 million. We remain on target to hit at least $100 million of cost savings by fiscal 2023. We would achieve an annual adjusted operating margin between 12.5% and 13.1%. At those levels of adjusted operating margin, our incremental margins will be around 25% in the back half of this year and north of the 20%, we originally envisioned for full year fiscal 2022. All 6,500 of us will remain restless until we achieve our mission to be the best industrial distributor in the world.

Earnings per share were $1.25 as compared to $0.32 in the same period prior year. Adjusted earnings per share were $1.29 as compared to adjusted earnings per share of a $1.03 in the prior year period, an increase of 25%.

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We added a net 1.5 million accounts last year, completed 15 million service tasks and executed an incredible 76 million individual trade orders. We reported just shy of $1 billion in revenue, which is 10% higher than a year ago, and adjusted EBITDA grew 26% compared to 2019. We began 20 years ago as a TAMP, a turnkey asset management platform, a category we invented, and we continue to lead by a substantial margin. Envestnet is proud to work with thousands of firms, including 17 of the 20 largest U.S. banks, 47 of the 50 largest wealth management and brokerage firms, over 500 of the largest RIAs and hundreds of fintech companies. We are the industry leader in wealthtech, supporting more than 106,000 financial advisors, 13 million investor accounts and more than $4.5 trillion in assets. Our consumer financial data aggregation capabilities are unmatched: 17,000 data sources, 470 million connected accounts, which grew by over 62 million last year, 35 million users, and also in the past year, nearly three million households that benefited from a financial planning experience using our award-winning software. Adjusted revenue for the quarter was $264 million, above expectations, as we saw outperformance across all revenue lines. As a result, our adjusted EBITDA of $65 million was also ahead of expectations, as were our adjusted earnings per share of $0.69. For the full year, adjusted revenue was $999 million, 10% higher than in 2019 despite the significant market pullback in the first quarter of 2020. Adjusted EBITDA came in 26% higher than last year at $243 million. Our adjusted EBITDA margin for the year was 24.3%, three percentage points above the prior year. Around $25 million to $30 million of operating expense favorability can be attributed solely to an operating environment that limited travel, caused delays in hiring and generally reduced spending activity. The total increase in this category is around $10 million or a little more than 2% above last year. This category also represents around $10 million of year-over-year increase in operating expense. In 2021, these investments account for around $30 million of increased operating expense The spend in these three categories, combined with an increase in our asset-based cost of revenue, will result in our operating expenses growing faster than revenue in 2021 as we noted in November, effectively reversing the temporary margin lift we saw in 2020. Specific guidance for the full year of 2021 includes the following: adjusted revenue growth of 10.5% to 12% compared to 2020. That's approximately $1.10 to $1.12 billion. By revenue line item, we expect asset-based revenue to be up nearly 20%, reflecting the strong fundamentals of the wealth business. Adjusted EBITDA should be between $225 million and $235 million, slightly below 2020, as the increase in operating expenses will more than offset the contribution from higher revenues. Adjusted earnings per share is expected to be between $1.95 and $2.08. This is down from the $2.57 we delivered in 2020 due to the modest decline in adjusted EBITDA and an increase in depreciation expense. Our guidance also includes the early adoption of a new accounting standard, impacting how we account for our convertible notes, which will lower earnings per share by $0.20. We ended the year with $385 million in cash and a net leverage ratio of two times EBITDA, down from 2.1 at the end of September. Similar to last quarter, our $500 million revolver remains entirely undrawn.

As a result, our adjusted EBITDA of $65 million was also ahead of expectations, as were our adjusted earnings per share of $0.69. Adjusted earnings per share is expected to be between $1.95 and $2.08.

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We delivered adjusted earnings of $1.73 per share and nearly $1.1 billion of free cash flow, repeating the record level of free cash flow we generated last quarter. Our performance clearly proves the power of doubling our reinvestment hurdle rate, double premium requires investments to earn a minimum of 60% direct after-tax rate of return using flat commodity prices of $40 oil and $2.50 natural gas. In the first half of this year, we reduced our long-term debt by $750 million and demonstrated our priority to returning cash, significant cash to shareholders with a commitment of $1.5 billion in regular and special dividends. We also closed on several low-cost, high potential bolt-on acquisitions in the Delaware Basin over the last 12 months. Year-to-date, we have committed $2.3 billion to debt reduction in dividends, which is slightly more than the $2.1 billion of free cash flow we've generated. While we announced our shift to the double-premium investment standard at the start of this year, the shift has been underway since 2016 when we first established our premium investment standard of 30% minimum direct after-tax rate of return using a conservative price deck of $40 oil and $2.50 natural gas for the life of the well. In the three years that followed, our premium drilling program drove a 45% increase in earnings per share, a 40% increase in ROCE in an oil price environment nearly 40% lower compared to the three-year period prior to premium. In addition, premium enabled this remarkable step change in our financial performance, while reinvesting just 78% of our discretionary cash flow on average, resulting in $4.6 billion of cumulative free cash flow. The impact from doubling our investment hurdle rate from 30% to 60% using the same conservative premium price deck is now positioning EOG for a similar step change to our well productivity and costs, boosting returns, capital efficiency, and cash flow. This year, we are averaging less than $7 per barrel of oil equivalent finding cost. Looking back over the last four quarters, EOG has earned a 12% return on capital employed with oil averaging $52. We are well on our way to earning double-digit ROCE at less than $50 oil, and it begins with disciplined reinvestment in high-return double-premium drilling. While EOG has 11,500 premium locations, approximately 5,700 are double-premium wells located across each of our core assets. In the past 12 months, through eight deals, we have added over 25,000 acres in the Delaware Basin through opportunistic bolt-on acquisitions at an approximate cost of $2,500 per acre. Exploration and bolt-on acquisitions are focused on improving the quality of the inventory by targeting returns in excess of the 60% after-tax rate of return hurdle. Once again, we exceeded our oil production target, producing slightly more than the high end of our guidance, driven by strong well results. We have already exceeded our targeted 5% well cost reduction in the first half of 2021. We now expect that our average well cost will be more than 7% lower than last year. As a reminder, this is in addition to the 15% well cost savings achieved in 2020. Average drilling days are down 11%, and the feet of lateral completed in a single day increased more than 15%. As a reminder, 65% of our well costs are locked in for the year, and the remaining costs we are actively working down through operational efficiencies. We reduced our greenhouse gas intensity rate 8% in 2020, driven by sustainable reductions to our flaring intensity. Achieving these targets is the first step on the path toward our ambition of net-zero emissions by 2040. For companywide operations in the U.S., water supplied by reuse sources last year increased to 46%, reducing freshwater to less than one-fifth of the total water used. We are starting to fill in the pieces on the road map to get to net-zero by 2040. Earlier this year, we announced our net-zero ambition for our Scope 1 and Scope 2 GHG emissions by 2040. As a result, since 2017, we have reduced our GHG intensity rate 20%, our methane emissions percentage by 80% and our flaring intensity rate by more than 50%. Our wellhead gas capture rate was 99.6% in 2020 and roll-out of additional closed-loop gas capture systems will help capture more of the remaining 0.4%. Over the past 18 months, we have deployed capital into several fuel substitution projects to power compressors used for natural gas pipeline operations and natural gas artificial lift. The EOG culture has embraced our 2040 net zero ambition, and we are focusing our efforts to minimize our carbon footprint as quickly as possible.

We delivered adjusted earnings of $1.73 per share and nearly $1.1 billion of free cash flow, repeating the record level of free cash flow we generated last quarter. Once again, we exceeded our oil production target, producing slightly more than the high end of our guidance, driven by strong well results. We have already exceeded our targeted 5% well cost reduction in the first half of 2021.

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Revenues for the quarter grew 5.6% to $553.3 million compared to $524 million for the same quarter in 2019. Net income rose approximately 16.5% [Phonetic] to $74.9 million [Phonetic] or $0.23 per diluted shares, compared to $64 million or $0.20 per diluted shares for the second quarter of last year. Revenues for the first six months of the year were $1.04 billion, an increase of 9.3% compared to $953 million for the same period last year. Net income for the first six months increased 8.9% to $118.1 million [Phonetic] or $0.36 per diluted share compared to $0.33 per diluted share for the comparable period last year, a 9% increase. Residential pest control grew an outstanding 14.8%. Commercial, however, excluding fumigation, was down 5.2%. We have offset some of those commercial revenue shortfalls with termite and ancillary service, which was up 7.3%. On the plus side, most of our residential customers have been at home 24/7 and they are becoming even more conscious of their home and, in some cases, the need to protect their family and property from unwanted pests. The record book for performance was completely rewritten as our inbound telephone sales effort replaced seven of the top 10 sales days in our history. From what we are currently experiencing, we are optimistic that these results will continue into the third quarter as July performance certainly reflects that as the remaining three top 10 sales days have been replaced. Adams Pest founded by John Adams and established in 1944 has expertise in all aspects of general pests and wildlife control and is the market leader in the Greater Melbourne and Adelaide areas. Looking at the numbers, the second quarter revenue of $553.3 million was an increase of 5.6% over the prior year's second quarter revenue of $524 million. Income before income taxes was $103.5 million or 19% above 2019. Net income was $75.4 million, up 17.2% compared to last year. Our GAAP earnings per share were $0.23 per diluted share. EBITDA was $126.9 million and rose 16.4% compared to 2019. The first six months revenue of $1.041 billion was an increase of 9.3% over the prior year's first six months revenue of $953 million. Income before income taxes was $158.9 million or 11.1% above last year. Net income was $118.6 million, up 9.3% compared to 2019. Our GAAP earnings per share were $0.36 per diluted share. EBITDA was $206.1 million and rose 13.6% compared to 2019. This along with the transition to new, more diversified vendors impacted our materials and supplies costs between $2 million and $3 million in Q2 and will impact the business in a similar manner for the remainder of the year. As Gary reviewed, our total revenue increase of 5.6% included 3.1% from Clark and other acquisitions and the remaining 2.5% was from pricing and organic growth. In total residential pest control, which made up 47% of our revenue, was up 14.8%, commercial pest control, ex fumigation, which made up 33% of our revenue was down 5.2% and termite and ancillary services, which made up approximately 20% of our revenue, was up 7.3%. Again, total revenue less acquisitions was up 2.5% and from that residential was up 10.3%, commercial, ex fumigation, decreased 7.8% and termite and ancillary grew by 5.5%. Our feedback from customers shared on our NPS score for our residential product showed 2.4 percentage points higher than last year, which included a new COVID-19 category. In total, gross margin increased to 53.8% from 51.7% in the prior year's quarter. Depreciation and amortization expenses for the quarter increased $1.8 million to $21.9 million, an increase of 8.9%. Depreciation increased $1 million due to acquisitions, vehicles acquired and equipment purchases, while amortization of intangible assets increased $754,000 due to the amortization of customer contracts from several acquisitions, including Clark. Sales, general and administrative expenses for the second quarter increased $9.4 million, or 5.8%, to $171.3 million, or 30.9% of revenues, which was flat to last year. As for our cash position for the period ended June 30th, 2020, we spent $56 million on acquisitions, compared to $410.1 million in the same period last year, which included Clark. We paid $65.5 million on dividends and had $12.4 million of capex, which was slightly lower compared to 2019. We ended the period with $134.8 million in cash of which $73.2 million is held by our foreign subsidiaries. Yesterday, the Board of Directors approved a temporary reduction of the regular cash dividend to $0.08 per share that will be paid on September 10th, 2020 to stockholders of record at the close of business on August 10th, 2020.

Revenues for the quarter grew 5.6% to $553.3 million compared to $524 million for the same quarter in 2019. Net income rose approximately 16.5% [Phonetic] to $74.9 million [Phonetic] or $0.23 per diluted shares, compared to $64 million or $0.20 per diluted shares for the second quarter of last year. Our GAAP earnings per share were $0.23 per diluted share.

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During the quarter, we earned GAAP net income of $153.1 million. We had another busy quarter as we wrote a record $33.6 billion of new business, which more than offset the pressure of lower annual persistency on our existing book of business and resulted in our insurance in force growing to $262 billion, nearly 14% higher than the same period last year. An increasing percentage of our new insurance written is from purchase transactions, accounting for 79% of our NIW in the second quarter compared to 60% last quarter. Our application pipeline, a leading indicator of NIW indicates this trend has continued with purchase transactions continuing to account for more than 85% of the applications received in recent months. We believe that home prices may be increasing for more sound reasons than in 2005-2007 cycle. Taking a look at our insurance and force portfolio our loss ratio was a low 11.6% in the quarter. At quarter end, we maintained a $2.3 billion excess over PMIERs minimum required assets and our PMIERs efficiency ratio was 167% at the end of the second quarter. Reflecting our capital position and long-term confidence in our transformed business model, a $150 million dividend from MGIC to our holding company was declared, and paid after the end of the second quarter, and the holding company Board authorized a 33% increase in the quarterly common stock dividend. In the second quarter, we earned $153 million of net income or $0.44 per diluted share and generated an annualized 13% return on beginning shareholders' equity. This compares to $14 million of net income or $0.04 per diluted share in the same period last year. During the quarter, total revenues were $298 million compared to $294 million last year, with the increase primarily due to higher net premiums earned. The net premium yield for the second quarter was 39.1 basis points, which was down 1.8 basis points compared to last quarter. During the quarter, they totaled $20 million compared to $28 million last quarter and $33 million in the second quarter of 2020. Net losses incurred were $29 million in the second quarter compared to $217 million in the same period last year and $40 million last quarter. In the second quarter, we received approximately 9,000 new delinquency notices, which represents less than 1% of the number of loans insured as of the start of the quarter and is 30% less than the number of notices received last quarter. The estimated claim rate on new notices received in the second quarter of 2021 was approximately 7.5%, compared to approximately 7% in the second quarter of 2020. The reserve for incurred but not reported or IBNR increased by $4 million to approximately $24 million compared to an increase of $30 million in the second quarter of 2020. A review of loss reserves on previously received delinquent notices, determined that there was immaterial loss reserve development in the quarter compared to $10 million of unfavorable development in the second quarter of last year. Of the approximately 43,000 loans in our delinquency inventory at June 30, approximately 55% or 23,600 loans were reported to us to be in forbearance and we estimate that the substantial majority of those loans in forbearance will reach the end of their forbearance period in the second half of 2021. The number of claims received in the quarter, remained very low and were down 35% from the same period last year, due to the various foreclosure and eviction moratoriums and primary paid claims in the quarter remained low at $11 million. At the end of the second quarter, we had approximately $772 million of holding company liquidity and a $2.3 billion access to the PMIERs minimum requirements at the writing company. First, we completed our fifth excess of loss reinsurance transaction executed through an ILN, the third such transaction in the last 10 months. This most recent transaction provides $400 million of loss protection and increases our PMIERs' excess. Second, we paid a $150 million dividend from MGIC to our holding company. The holding company liquidity is above our current target levels, which supported the 33% increase in the common stock dividend. Additionally, in the third quarter we intend to resume our share repurchase program and we expect that we will fully use the remaining $291 million repurchase authorization prior to its expiration at year-end 2021. It is a $2.3 billion excess to the PMIERs requirement as of June 30, or 167% PMIERs sufficiency ratio, which was above our current target level and supported the $150 million dividend from MGIC to our holding company. Although, it's early in the 10 years of new FHFA acting Director Sandra Thompson, at this time we are not aware of any policy initiatives that will provide new challenges to our company or industry. We have a book of business that has strong underlying credit characteristics, which is supported by a strong and dynamic balance sheet with a low debt-to-capital ratio, an investment portfolio of nearly $7 billion contractual premium flow and a robust reinsurance program.

In the second quarter, we earned $153 million of net income or $0.44 per diluted share and generated an annualized 13% return on beginning shareholders' equity.

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We earned $5.1 billion or $1.17 per common share in the third quarter. These results included a $1.7 billion decrease in the allowance for credit losses as credit quality continued to improve. Expenses continue to decline, reflecting progress on our efficiency initiatives and included $250 million associated with the September OCC enforcement action. While lower than the peak in March, our consumer customers' median deposit balances continued to remain above pre-pandemic levels, up 48% for customers who received federal stimulus and 40 -- I'm sorry, up 48% for customers who received federal stimulus and 40% higher for those who did not receive federal aid. Weekly debit card spend during the third quarter was up every week compared to 2019 and in the week ending October 1 was up 14% compared to 2020 and 26% compared to 2019. Areas hardest hit by the pandemic have recovered, including travel, up 2%; entertainment, up 39%; and restaurant spending, up 20% during the week ending October 1 compared with 2019. Consumer credit card spending activity continued to increase, up 18% in the third quarter compared to 2019 and 24% compared to 2020. During the week ended October 1, travel-related spending, which was hardest hit during the pandemic, was up significantly from 2020 but remains the only category that is not yet fully rebounded to 2019 levels, still down 8% compared to 2019. 15 of 18 operating committee members are now new to their roles. We've also been making significant enhancements to our payments capabilities and are seeing that momentum pull through on our customers' Zelle usage, with Zelle users increasing 24%, transactions up 50%, and volumes are up 56% from a year ago. Clear Access, our no-fee overdraft checking product now has over 1 million outstanding customer accounts. This feature has helped over 1.3 million customers avoid overdraft-related fees on 2.5 million transactions in the third quarter. We've now donated $305 million in support of small business recovery, including 215 CDFIs, which, in turn, is expected to help nearly 150,000 small business owners maintain more than 250,000 jobs. Additionally, in the third quarter, we launched Connect to More, a resource hub for women-owned businesses and a mentoring program partnering with Nasdaq Entrepreneurial Center to empower 500 women-owned businesses. We committed to invest $5 million through the NeighborhoodLIFT program to help more than 300 low- and moderate-income residents in Philadelphia with home down payment assistance. Consumers' financial condition remains strong with leverage at its lowest level in 45 years and the debt burden below its long-term average. We remain on target to achieve a sustainable 10% ROTCE, subject to the same assumptions we've discussed in the past on a run-rate basis at some point next year, and we'll then discuss our plan to continue to increase returns. Net income for the quarter was $5.1 billion or $1.17 per common share. Our results included a $1.7 billion decrease in the allowance for credit losses. And as Charlie highlighted, the third quarter included $250 million in operating losses associated with the September OCC enforcement action. Within that, equity gains declined from the second quarter but increased $220 million from a year ago, predominantly due to our affiliated venture capital and private equity businesses. Our effective income tax rate in the third quarter was 22.9%. Our CET1 ratio declined to 11.6% in the third quarter as we repurchased $5.3 billion of common stock. As a reminder, our regulatory minimum will be 9.1% in the first quarter of 2022, reflecting a lower GSIB capital surcharge. Additionally, under the stress capital buffer framework, we have flexibility to increase capital distributions and if possible, we will be able to repurchase more than the $18 billion included in our capital plan over the four-quarter period, depending on market conditions and other risk factors, including COVID-related risks. Our net loan charge-off ratio was 12 basis points in the quarter. Commercial credit performance continued to improve, and net loan charge-offs declined $42 million from the second quarter to 3 basis points. Net loan charge-offs declined $80 million from the second quarter to 23 basis points. Nonperforming assets declined $321 million or 4% from the second quarter, driven by lower commercial nonaccruals, with declines across all asset types. Total period end of loans grew for the first time since the first quarter of 2020 and were up $10.5 billion from the second quarter with growth in commercial and industrial loans, auto, other consumer, credit card, and commercial real estate. Average deposits increased $51.9 billion or 4% from a year ago with growth in our consumer businesses and commercial banking, partially offset by continued declines in corporate and investment banking and corporate treasury, reflecting targeted actions to manage under the asset cap. Net interest income grew $109 million or 1% from the second quarter and was down $470 million or 5% from a year ago. We had $20 billion of loans we purchased out of mortgage-backed securities or EPBOs at the end of the third quarter, down $4 billion from the second quarter. At the end of the third quarter, we also had $4.7 billion of PPP loans outstanding, and we expect the balances to steadily decline over the next several quarters and to be under $1 billion by the end of next year. We continue to expect net interest income to be near the bottom of our initial guidance range of flat to down 4% from the annualized fourth-quarter 2020 level of $36.8 billion for the full year. Noninterest expense declined 13% from a year ago. During the first nine months of this year, these initiatives have helped to drive a 16% decline in professional and outside services expense by reducing our spend on consultants and contractors, an 8% reduction in occupancy costs by reducing the number of locations, including branches and offices. Occupancy costs have also declined from lower COVID-19 related costs and a 5% decline in salaries expense by eliminating management layers and increasing expansion controls across the organization and optimizing branch staffing. The pandemic accelerated customer migration to digital, which continue with mobile log-ons up 14% in the third quarter from a year ago. While teller transactions were flat from a year ago, they were over 30% lower than pre-pandemic levels as transactions have migrated ATMs and mobile. Over the past year, we've reduced our number of branches by 433 or 8% and lowered headcount and branch banking by 23%. However, by executing on efficiency initiatives, nonrevenue-related expenses in the third quarter declined 6% from a year ago, and non-advisor headcount was down 10% from a year ago. With three quarters of actual results already, our current outlook for 2021 expenses, excluding restructuring charges and the cost of business exits, is approximately $53.5 billion. Note that we had $193 million of restructuring charges and cost of business exits during the first nine months of the year. As mentioned, the outlook accounts for the fact that we expect full-year operating losses to be approximately $250 million higher than our assumptions at the beginning of the year. This includes approximately $1 billion of operating losses incurred during the first nine months of the year, and our outlook assumes $250 million of operating losses in the fourth quarter. Our current outlook also assumes revenue-related compensation will be approximately $1 billion this year, which is higher than the $500 million we assumed at the beginning of the year. Consumer and small business banking revenue increased 2% from a year ago, primarily due to an increase in consumer activity, including higher debit card transactions and lower COVID-related fee waivers. Home Lending revenue declined 20% from a year ago, primarily due to a decline in mortgage banking income, driven by lower gain-on-sale margins, origination volumes, and servicing fees. Credit card revenue was up 4% from a year ago, driven by increased spending and lower customer accommodations and fee waivers in response to the pandemic. Auto revenue increased 10% from a year ago on higher loan balances. Our mortgage originations declined 2% from the second quarter with correspondent originations growing 2%, which was more than offset by a 5% decline in retail. The competitive environment has remained relatively stable, and we've had our second consecutive quarter of record originations with volume up 70% from a year ago. Transactions were relatively stable from the second quarter and up 11% from a year ago, with increases across nearly all categories. We had strong growth in new credit card accounts up 63% from the second quarter, driven by the launch of our new Active Cash Card. Credit card point-of-sale purchase volume was up 24% from a year ago and 4% from the second quarter. While payment rates remain high, average balances grew 3% from the second quarter, the first-time balances have grown since the fourth quarter of 2020. Middle-market banking revenue declined 3% from a year ago, primarily due to lower loan balances and lower interest rates, which were partially offset by higher deposit balances and deposit-related fees. Asset-based lending and leasing revenue declined 12% from a year ago, driven by lower loan balances and lower lease income. Noninterest expense declined 14% from a year ago, primarily driven by lower salaries and consulting expense due to efficiency initiatives, as well as lower lease expense. However, there was some increase in demand late in the quarter and period-end balances increased $1.6 billion or 1% from the second quarter. In banking, total revenue increased 12% from a year ago. Commercial real estate revenue grew 10% from a year ago, driven by higher commercial servicing income, loan balances and capital markets results in stronger commercial gain-on-sale volumes and margins and higher underwriting fees. Markets revenue declined 15% from a year ago, driven by lower trading activity across most asset classes, primarily due to market conditions. Noninterest expense declined 10% from a year ago, primarily driven by reduced operations expense due to efficiency initiatives. Wealth and investment management revenue on Slide 13 grew 10% from a year ago. Client assets increased 13% from a year ago, primarily driven by higher market valuations. Average deposits were up 4% from a year ago, and average loans increased 5% from a year ago, driven by continued momentum in securities-based lending. The decline in revenue from the second quarter was primarily driven by lower equity gains from our affiliated venture capital and private equity businesses, and expenses included the $250 million operating loss associated with the OCC enforcement action in September.

We earned $5.1 billion or $1.17 per common share in the third quarter. We committed to invest $5 million through the NeighborhoodLIFT program to help more than 300 low- and moderate-income residents in Philadelphia with home down payment assistance. Net income for the quarter was $5.1 billion or $1.17 per common share. Our results included a $1.7 billion decrease in the allowance for credit losses. Net interest income grew $109 million or 1% from the second quarter and was down $470 million or 5% from a year ago. Occupancy costs have also declined from lower COVID-19 related costs and a 5% decline in salaries expense by eliminating management layers and increasing expansion controls across the organization and optimizing branch staffing. Our mortgage originations declined 2% from the second quarter with correspondent originations growing 2%, which was more than offset by a 5% decline in retail. Average deposits were up 4% from a year ago, and average loans increased 5% from a year ago, driven by continued momentum in securities-based lending.

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Some of the results the team produced include, funds from operations, coming in above guidance, up 10.5% compared to second quarter last year and $0.03 ahead of our guidance midpoint. This marks 33 consecutive quarters of higher FFO per share, as compared to the prior year quarter, truly a long-term trend. Our second quarter occupancy averaged 96.8%, up 20 basis points from second quarter 2020. And at quarter end, we're ahead of projections at 98.3% leased and 96.8% occupied. Quarterly releasing spreads were among the best in our history at 31.2% GAAP and 16.2% cash. And year-to-date, those results are 28% GAAP and 16% cash. Finally, cash same-store NOI rose by 5.6% for the quarter and 5.8% year-to-date. I'm grateful, we ended the quarter at 98.3% leased, matching our highest quarter on record. Looking at Houston, we're 96.5% leased, with it representing 12.3% of rents, down 150 basis points from a year ago and is projected to continue shrinking. Brent will speak to our budget assumptions, but I'm pleased that we finished the quarter at $1.47 per share in FFO and are raising our 2021 forecast by $0.09 to $5.88 per share. Based on the market strength we're seeing today, we're raising our forecasted starts to $275 million for 2021. FFO per share for the second quarter exceeded our guidance range at $1.47 per share and compared to second quarter 2020 of $1.33, represented an increase of 10.5%. From a capital perspective, during the second quarter we issued $60 million of equity at an average price over $162 per share, and we issued and sold $125 million of senior unsecured notes, with a fixed interest rate of 2.74% in a 10-year term. The capacity was increased from $395 million to $475 million, while the interest rate spread was reduced to 22.5 basis points, and our ongoing efforts to bolster our ESG efforts we incorporated a sustainability-linked metric into the renewal. Our debt-to-total market capitalization was 17%, debt-to-EBITDA ratio at 4.9 times, and our interest and fixed charge coverage ratio increased to over eight times. Bad debt for the first half of the year is a net positive $90,000, because of tenants whose balance was previously reserved that brought current exceeding new tenant reserves. Looking forward FFO guidance for the third quarter of 2021 is estimated to be in the range of $1.46 to $1.50 per share and $5.83 to $5.93 for the year, a $0.09 per share increase over our prior guidance. The 2021 FFO per share midpoint represents a 9.3% increase over 2020. Among the notable assumption changes that comprise our revised 2021 guidance, include: increasing the cash same-property midpoint by 18% to 5.2%, increasing projected development starts by over 30% to $275 million and increasing equity issuance from $140 million to $185 million.

Brent will speak to our budget assumptions, but I'm pleased that we finished the quarter at $1.47 per share in FFO and are raising our 2021 forecast by $0.09 to $5.88 per share. FFO per share for the second quarter exceeded our guidance range at $1.47 per share and compared to second quarter 2020 of $1.33, represented an increase of 10.5%.

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This quarter, we delivered record revenue of $1.27 billion, reflecting growth at 24% from 2020, and an increase of 19% to 2019. Record operating income of $210 million, reflecting a margin at 16.5%, our highest rate since 2007. The processes, disciplines and capabilities we have put in place over the past 18 months will continue to set us apart, fueling strong returns and taking AEO to even greater heights. Acquiring Quiet allows us to build on the efficiencies we've gained over the past 12 months and position us for success as we grow our business over the coming years. 28% revenue growth in the third quarter following a 34% increase last year demonstrates Aerie's strong growth path. Profit flow-through was also very healthy with a 16.5% operating margin, reflecting new third quarter highs for the brand. We achieved this despite some unevenness of inventory flow during factory shutdowns in South Vietnam. Year-to-date, Aerie's customer file has expanded 15%. We opened 29 new Aerie doors in the quarter, including a mix of new stand-alone and side-by-side formats, roughly a quarter of them are OFFLINE doors. I'm thrilled with the great progress we're making just 11 months into the launch of our new strategy. Sales in the quarter rose 21% compared to 2020 and increased 8% to 2019. This resulted in significant profit flow-through and operating margin of 27.8% that reflected new highs. We are pleased to see store traffic rebuild rising in the double-digits, driving a 29% increase in store revenue. Our digital business continued at a healthy pace with revenues up 10%, successfully lapping 29% growth in the prior year. Year-to-date, digital penetration is 35%, and our trailing 12-month digital revenue is approximately $1.8 billion with very strong profitability. Over the past 12 and 24 months, we added almost 1.75 million and 2.25 million new customers, respectively. Approximately a third are engaging across both brands and spending approximately 2 times that of our average customer annually. Delivery costs leveraged 120 basis points in the quarter. However, as Jen discussed, Aerie's legging category experienced uneven inventory flows when factory closures in Vietnam created product delays. Revenue of $1.27 billion, operating income of $210 million and adjusted earnings per share of $0.76 marked third quarter records for the company. Gross margin of 44.3% and operating margin of 16.5% hit their strongest levels since 2007. Consolidated third quarter net revenue increased $242 million or 24% versus third quarter 2020 and is up $208 million or 19% from 2019. Across brands, sales metrics were very favorable, strong demand, higher full price sales and fewer promotions drove the average unit retail up 15% and fueled a high single-digit increase in our average transaction value. Revenue rose 28% from third quarter 2020 and over 70% from third quarter 2019. Aerie's operating profit rose 46% and the operating margin expanded to 16.5%, marking a new third quarter high. Incremental freight costs were $5 million or a 170 basis point headwind to brand operating margins in the quarter. The third quarter saw a significant profit unlock at AE as top line grew 21% and operating profit jumped 68%. Operating margins hit a remarkable 27.8%. As Jen mentioned, with improvements across key categories, the top line grew 8% against 2019. Total company consolidated gross profit dollars were up 36% compared to the third quarter of 2020, reflecting a 44.3% gross margin rate. As a result of strong sales, we saw SG&A leverage 190 basis points. The dollar increase of $41 million was due primarily to higher store payroll, especially as we lapped capacity constraints last year as well as new store openings and increased advertising. Record operating income of $210 million reflected a 16.5% operating margin, our highest third quarter rate since 2007. Adjusted earnings per share was $0.76 per share, marking a record third quarter. Our diluted share count was 205 million and included 34 million shares of unrealized dilution associated with our convertible notes. Ending inventory was up 32% compared to a 13% decline last year. The increased freight costs had about a 10 point impact on ending inventory at cost. Our balance sheet remains healthy and we ended the quarter with $741 million in cash, up from $692 million in the third quarter 2020. Capital expenditures totaled $58 million in the quarter and $144 million year-to-date. For 2021, we continue to capital expenditures to come in on the low end of our $250 million to $275 million guidance range, reflecting cost savings and project timing. Due to backlogs in building materials and fixtures, several of our third quarter store openings shifted into the fourth quarter, we expect the majority of these stores to open by the end of the year. However, that has come with additional freight costs in the range of $70 million to $80 million, which will impact the fourth quarter. Of course, we expect to nicely exceed $600 million of operating income for the year, well above the $550 million 2023 target.

This quarter, we delivered record revenue of $1.27 billion, reflecting growth at 24% from 2020, and an increase of 19% to 2019. We achieved this despite some unevenness of inventory flow during factory shutdowns in South Vietnam. Year-to-date, Aerie's customer file has expanded 15%. Our digital business continued at a healthy pace with revenues up 10%, successfully lapping 29% growth in the prior year. However, as Jen discussed, Aerie's legging category experienced uneven inventory flows when factory closures in Vietnam created product delays. Across brands, sales metrics were very favorable, strong demand, higher full price sales and fewer promotions drove the average unit retail up 15% and fueled a high single-digit increase in our average transaction value. Revenue rose 28% from third quarter 2020 and over 70% from third quarter 2019. Adjusted earnings per share was $0.76 per share, marking a record third quarter. Ending inventory was up 32% compared to a 13% decline last year. Due to backlogs in building materials and fixtures, several of our third quarter store openings shifted into the fourth quarter, we expect the majority of these stores to open by the end of the year. However, that has come with additional freight costs in the range of $70 million to $80 million, which will impact the fourth quarter. Of course, we expect to nicely exceed $600 million of operating income for the year, well above the $550 million 2023 target.

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This was a result of our nearly 12,000 teammates delivering creative risk management solutions for our customers. We're also very proud that last week our Board of Directors authorized an increase of 10.8% in our quarterly dividend. We delivered $770 million of revenue, growing 14.3% in total, and 8.5% organically. Our EBITDAC margin grew by 280 basis points to 35.6% versus the third quarter of 2020. Our net income per share for the third quarter was $0.52 on an as reported basis and $0.58, excluding the change in estimated acquisition earn-out payables. As the year-to-date results are the best in our history, 10.8% internal growth year-to-date. Rate increases remain relatively consistent with prior quarters, admitted market rates continue to be up 3% to 8% across most lines, the outliers or workers' compensation rates, which are down 1% to 3%, and commercial auto rates which were up 5% to 10%. From an E&S perspective, most rates were up 10% to 20% with some outliers. Coastal property both wind and quake, are up 10% to 30%, with this being a slightly broader range than we saw in the previous quarter. Professional liability for most accounts remained very challenging with rates up 10% to 15%-plus, cyber-rates in some instances could increase dramatically depending on the security in place with the customer. From an M&A perspective, we were successful in closing seven transactions during the quarter, with annual revenues of approximately $21 million. We've closed a total of 11 deals year-to-date with annual revenues of $65 million have already announced a couple of additional acquisitions in October. Retail delivered great results with organic revenue growth of 8.3% for the third quarter. National Programs delivered another outstanding quarter, growing 13.2% organically. The Wholesale Brokerage segment delivered 5.1% organic growth with commercial brokerage and binding performing well, driven by new business and continued rate increases for most lines of coverage. The Services segment delivered organic revenue growth of 0.5%. For the third quarter, we delivered total revenue growth of $96.3 million or 14.3% and organic revenue growth of 8.5%. Income before income taxes and EBITDAC both increased by approximately 24%. EBITDAC margins expanded 280 basis points, driven by strong organic revenue growth and managing our expenses. Net income increased by $12.4 million or 9.3% and our diluted net income per share increased by 10.6% to $0.52. The effective tax rate increased to 25.5% for the third quarter of this year as compared to 15.5% in the third quarter of last year. We continue to anticipate our full year effective tax rate for 2021 will be in the 23% to 24% range. Our weighted average number of shares increased slightly compared to the prior year and our dividends per share increased to $0.093 or 9.4% compared to the third quarter 2020. The change in estimated acquisition earn-out payables was a charge of $23.1 million in the third quarter of this year compared to $15.3 million for the same period last year. Excluding these non-cash items, income before income taxes on an adjusted basis, increased by 26.4%. Our net income on an adjusted basis increased by $16.7 million or 11.4%. And our adjusted diluted net income per share was $0.58, increasing 11.5%. For the quarter, our total commissions and fees increased by 14.6% and our contingent commissions and GSCs increased by 27.1% as we qualify for certain additional contingents and GSCs this year. Organic revenue, which excludes the net impact of M&A activity and changes in foreign exchange rates increased by 8.5%. The Retail segment delivered total revenue growth of 17.8%, driven by acquisition activity over the past 12 months and organic revenue growth of 8.3% with solid growth across all lines of business. EBITDAC margin for the quarter increased by 180 basis points and EBITDAC grew 24.6%, due to higher organic revenue growth, increased contingent commissions and GSCs, and managing our expenses even with slightly higher variable cost. Our National Programs segment increased total revenue by 13.7% and organic revenue by 13.2%. In conjunction with the onboarding of a new customer, we recognized approximately $5 million of incremental revenue this quarter that represents timing. EBITDAC increased by $18.7 million or 28.5% with the margin improving 510 basis points, as a result of strong organic revenue growth, managing our expenses and the positive impact of the non-recurring write-off of certain receivables that occurred in the third quarter of last year. The Wholesale Brokerage segment delivered total revenue growth of 11.2% driven by acquisitions in the past 12 months and organic revenue growth of 5.1%. EBITDAC grew 4.7%, but the growth was impacted by incremental broker compensation driven by higher levels of performance, slightly higher variable cost and certain non-recurring intercompany IT charges. Our Services segment increased total revenue and organic revenue by 0.5% with EBITDAC growing 6.8%, driven by continued management of our expenses. We experienced another strong quarter of cash flow generation and have delivered $628 million of cash flow from operations through the first nine months of this year, growing $88 million or 16% as compared to the first nine months of last year. Our ratio of cash flow from operations as a percentage of total revenue remained strong at 27% for the first nine months of this year.

Our net income per share for the third quarter was $0.52 on an as reported basis and $0.58, excluding the change in estimated acquisition earn-out payables. For the third quarter, we delivered total revenue growth of $96.3 million or 14.3% and organic revenue growth of 8.5%. Net income increased by $12.4 million or 9.3% and our diluted net income per share increased by 10.6% to $0.52. And our adjusted diluted net income per share was $0.58, increasing 11.5%.

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The combination of these variables generated record net income of $135.8 million and earnings per share of $1.36, each up more than 45% versus the prior quarter and exceeding our pre-pandemic performance in 2019. Total loans grew $985 million for the quarter to $26 billion and deposits increased $1.3 billion to $29 billion, reducing our loan to deposit ratio to 90.2%. Our loan growth continues to be concentrated in low-loss asset classes such as warehousing lending, which accounted for over 100% of the loan growth and 56% of the deposit growth and $267 million in capital call lines where the risk-reward equation is heavily skewed in our favor. In the quarter, high average interest earning assets of $1.9 billion were offset by lower rates, substantial liquidity build and a one-time adjustment to PPP loan fee recognition to reflect modification and extension of the CARES Act forgiveness timeframe, which pushed our net interest margin downward to 3.71%, as net interest income declined $13.7 million from the second quarter to $285 million, but improved $18.3 million from a year ago period. Excluding the impact of PPP loans, net interest income would have only fallen by $4 million, which was largely the impact of interest expense on our new subordinated debt issued in middle of the second quarter. We believe approximately 21 basis points of this compression is transitory in nature and NIM is expected to rise as excess liquidities put to work through balance sheet growth, deposit seasonality and warehouse lending, driving balances lower and PPP loan forgiveness assumptions normalize. Provision for credit losses was $14.7 million in the third quarter considerably less than the $92 million in the second quarter, which was primarily attributable to stable to modest improvements in macroeconomic forecast assumptions, loan growth in low-risk asset classes and limited net charge-offs of $8.2 million or 13 basis points of average assets. Dale, will go into more detail on the specific drivers of our provision but our total loan ACL to funded loans ratio now stands at 1.37% or $355 million and 1.46%, excluding PPP loans, which are guaranteed by the CARES Act. As of Q3, $1.3 billion of loans are on deferral or 5% of the total portfolio, which represents a 55% decline from Q2. We expect $1.1 billion of loan deferrals will expire next quarter, which will continue to drive down our outstanding modifications. Our quarterly efficiency ratio improved to 39.7% compared to 43.2% from the year ago period, becoming more efficient during the economic uncertainty provides the incremental flexibility to maintain PPNR. Finally, Western Alliance continues to generate significant excess capital, which grew tangible book value per share to $29.03, or 4.3% over the previous quarter and 13.4% year-over-year. Supported by our robust PPNR generation, capital rose $121.6 million with a CET1 ratio of 10%, supporting 15.6% annualized loan growth. Over the last three months Western Alliance generated record net income of $135.8 million or $1.36 per share, which was up 46% on a linked-quarter basis. As Ken mentioned, net income benefited reduction in provision expense for credit losses to $14.7 million, primarily driven by stability and the economic outlook during the quarter in a release of specific reserves associated with the fully resolved credit. Net interest income grew 1$8.3 million year-over-year to $284.7 million but declined $13.7 million during the quarter, primarily result of changes in prepayment assumptions on PPP loans that impacted fee accretion recognition. As a result, using the effective interest method, we reversed out $6.4 million of the fees recognized in Q2 and overall PPP fee recognition has been extended. The $43 million, we are to receive will be simply be booked to income more slowly than our original expectations. Net interest income was impacted in Q3, as a result of this timing change by $10.6 million. Non-interest income fell $700,000 to $20.6 million from the prior quarter. We benefited from a recovery of an additional $5 million mark-to-market loss on preferred stocks that we recognized in the first quarter. Over the last two quarters, we recovered 80% of that $11 million original loss. Finally, non-interest expense increased $9.3 million, as the deferral of loan origination cost fell, as PPP loan originations dropped, as well as an increase in incentive accruals as our third quarter pandemic -- as our third quarter performance exceeded our original third quarter budget, which was established before the pandemic. Strong ongoing balance sheet momentum coupled with diligent expense management drove pre-provision net revenue to $181.3 million, up 13.5% year-over-year and consistent with our overall growth trend from the first quarter, as the second quarter benefited from one-time PPP recognition of BOLI restructuring in FAS 91 loan cost deferrals. Investment yields decreased 23 basis points from the prior quarter to 2.79% and fell 29 basis points from the prior year due to the lower rate environment. Loan yields decreased 35 basis points following declines across most loan types, mainly driven by changing loan mix and in the reduction of PPP loan fees, resulted in lower PPP loan yield during the quarter. Costs of interest bearing deposits was reduced by 9 basis points in Q3 to 31 basis points with an end of quarter spot rate of 0.27% [Phonetic], as we continue to lower posted deposit rates and push out higher cost exception price funds. The spot rate for total deposits, which includes non-interest bearing deposits was 15 basis points. When all of the company's funding sources are considered, total funding costs declined by 2 basis points with an end of quarter spot rate of 0.25%. Additionally, in October, we called $75 million of subordinated debt that has diminishing capital treatment with the current rate of 3.4%. Despite the transition to a substantially lower rate environment during 2020, net interest income increased 6.9% year-over-year to $284.7 million. As mentioned earlier, during Q3, our extraordinary build and liquidity and adjustments to PPP loan fee recognition compressed our net interest margin of 3.71%, as net interest income declined $13.7 million. PPP loans reduced our NIM during the quarter by 13 basis points. This changes to prepayment assumptions, reduced SBA fees recognized resulting in PPP loan yield of 1.76%. Excluding this timing difference, net interest income declined only $4 million quarter-over-quarter, primarily due to interest expense on the new subordinated debt that we issued last May, resulting in a net interest margin of 3.84%. Referring to the bar chart on the lower left section of the page, of the $43 million in total PPP loan fees net origination costs that we received, only $3.3 million was recognized in the third quarter. The recognized reversal of PPP was $6.1 million in Q3 and expect fee recognition to be approximately $6.9 million in the fourth quarter and taper off as prepayments and forgiveness are realized. Additionally, average excess liquidity relative to loans increased $1.3 million in the quarter, the majority of which are held at the Federal Reserve Bank earning minimal returns, which impacted NIM by approximately 21 basis points in aggregate. Regarding efficiency, on a linked-quarter basis, our efficiency ratio increased to 39.7%, as we continue to invest in our business to support future growth opportunities. Excluding PPP, net loan fees and interest, the efficiency ratio for the quarter would have been 40.7%, which as we indicated last quarter should be moving closer to our historical levels in the low-40s. Return on assets increased 44 basis points from the prior quarter to 1.66%, while provisions fell. PPNR ROA decreased 47 basis points to 2.22%, as attractive decline in margin from the prior quarter. Our strong balance sheet momentum continued during the quarter as loans increased $985 million to $26 billion and deposit growth of $1.3 billion brought our deposit balance to $22.8 billion at quarter-end. Inclusive of PPP, both loans and deposits grew approximately 29% year-over-year with our focus on loan loss segments and DDA. The loan to deposit ratio decreased to 90.2% from 90.9% in Q2, as our strong liquidity position continues to provide us with balance sheet capacity to meet funding needs. Our cash position remains elevated at $1.4 billion at quarter-end compared to $2.1 billion quarterly average, as deposit growth continues to outpace loan originations. Finally, tangible book value per share increased to $1.19 over the prior quarter to $29.03, an increase of $3.43, or 13.4% over the past 12 months. The vast majority of the $985 million in loan growth was driven by increases in C&I loans of $892 million, supplemented by construction loan increases of $103 million. Residential and consumer loans now comprise 9.3% of our portfolio, while construction loan concentration remains flat at 8.8% of total loans. Within the C&I growth for the quarter and highlighting our focus on low-risk assets that Ken mentioned, capital call lines grew $267 million, mortgage warehouse loans grew over $1 billion and corporate finance loans decreased $141 million this quarter. Notably, year-over-year deposit growth of $6.4 million is higher than the annual deposit growth in any previous calendar year. Deposits grew $1.3 billion or 4.7% in the third quarter, driven by increases in non-interest bearing DDA of $777 million, which now comprise over 45% of our deposit base plus growth in savings in money market accounts of $752 million. By quarter-end, deferrals had declined by $1.6 billion or 55%, reducing total loan deferrals from 11.5% in Q2 to 5%. Excluding the hotel franchise finance segment in which we executed a unique sector specific to hurdle strategy, the bank wide deferral rate is approximately 1.6%. We have received minimal additional request for further deferrals and 98% of clients with expired deferrals are now current in payments. We expect $1.1 billion of loan deferrals will expire in the current quarter, which will substantially drive down outstanding modifications. Consistent with this trend, as of yesterday deferrals are down $420 million in October, bringing the current total to $880 million. Regarding asset quality, our non-performing assets and OREO to loan ratio remained flat at 47 basis points to total assets, while total classified assets increased to $28 million or 4 basis points to 98 basis points to total assets. Classified accruing loans rose by $21 million, explainable by a few loans 90 days past due as of September 30. Special Mention loans increased $81 million during the quarter to 1.83% of funded loans, which is a result of our credit mitigation strategy to early identify, elevate and apply heightened monitoring to loans and segments impacted by the current COVID environment. Over 60% of the increase in Special Mention loans are from previously identified segments uniquely impacted by the pandemic, such as the hotel portfolio and a component of our corporate finance division credits determined to have some level of repayment dependency on travel, leisure or entertainment. As we have discussed in the past, Special Mention loans are not predictive of future migration to classified or loss, since over the past five years, less than 1% has moved through charge-offs. Our total allowance for credit losses rose a modest $7 million from the prior quarter due to improvement in macroeconomic forecasts and loan growth in portfolio segments with lower expected loss rates. Additionally, we covered $8.2 million of net charge-offs. The ending allowance related to loan losses was $355 million. In all, total loan allowance for credit losses to funded loans declined a modest 2 basis points to 1.37% or 1.46%, when excluding PPP loans. When we exclude these segments, the ACL to funded loans on the remainder of the portfolio is 2%. Provision expense decreased to $14.7 million for Q3, driven by loan growth in lower loss segments and improved macroeconomic factors, while fully covering charge-offs. Net credit losses of $8.2 million or 13 basis points of average loans were recognized during the quarter compared to $5.5 million in Q2. We continue to generate significant capital and maintain strong regulatory capital ratios with tangible common equity to total assets of 8.9% and a Common Equity Tier 1 ratio of 10, a decrease of 20 basis points during the quarter due to our strong loan growth. Excluding PPP loans, TCE to tangible assets is 9.3%, a modest decline of 10 basis points from the first quarter. Inclusive of our quarterly cash dividend payments of $0.25 per share, our tangible book value per share rose $1.19 in the quarter to $29.03, up 13.4% in the past year. We continue to grow our tangible book value per share rapidly as it has increased three times that of the peers over the last 5.5 years. I would now like to briefly update you on our credit risk mitigation efforts and the current status of a few exposures to industries generally considered to be the most impacted by COVID- 19 pandemic. In our $500 million gaming book focused on all strip, middle market gaming-linked companies, total deferrals were reduced from 37% of the portfolio to only 4% and as of today, it's zero, as our clients are now open for business and are performing at or above their reopening plans. The $1.3 billion investor dependent portion of our Technology and Innovation segment has continued to benefit from significant sponsor support for technology firms best positioned to succeed in this COVID environment and an active fund raising environment as well. Since March 2020, 65 of our clients have raised over $1.7 billion in capital, resulting in 87% of borrowers with greater than six months remaining liquidity, up from 77% in Q1. Our CRE retail book of $674 million focus on local personal services based retail centers with no destination mall exposure, continues to modestly exceed national trends that shows rent collections rising from 50% in May to 80% in August. Similarly, the portfolio's deferrals have fallen from $176 million to $31 million. Lastly, our $2.1 billion Hotel Franchise Finance business focused on select service hotels with greater financial flexibility and LTVs at origination of approximately 60% continues to trend toward stabilization. Occupancy rates are tracking national averages, currently around 50%, which have tripled from April lows. At approximately 55% occupancy, select service hotels are estimated to cover amortizing debt service, so a typical hotel is operating at break even. Furthermore, we have seen deferrals declined from 83% of the portfolio to 44% of the portfolio and currently, we do not anticipate granting any additional deferrals in the hotel portfolio. Our pipelines are strong and we expect loan growth to return to previously anticipated levels of $600 million to $800 million for the next several quarters in low risk asset classes. The acquisition is a low risk, low cost entry point to build a meaningful residential mortgage business line at an accelerated timeframe with over 100 additional mortgage originator relationships. As Dale mentioned, our current spot rates indicate that the net interest margin pressure experienced this quarter will subside and net interest margin will trend upwards toward 3.9% in Q4.

The combination of these variables generated record net income of $135.8 million and earnings per share of $1.36, each up more than 45% versus the prior quarter and exceeding our pre-pandemic performance in 2019. Over the last three months Western Alliance generated record net income of $135.8 million or $1.36 per share, which was up 46% on a linked-quarter basis.

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Driven by strong operating income and continued improvement in portfolio valuations, our GAAP earnings were $0.72 per diluted share for the first quarter as compared to $0.42 per diluted share in the fourth quarter. Our GAAP book value per share increased almost 9% to $10.76 at March 31st as compared to $9.91 at December 31st. GAAP earnings finished well in excess of our $0.16 per share first quarter dividend. Leading third-party data shows new single-family home sales in the first quarter were up approximately 37% year-over-year, with existing home sales up approximately 15% in the same period. The median home sales price rose 11% year-over-year and homes that require a nonconforming mortgage are showing similar trends, particularly in growing secondary metro areas. Occupancy rates also continue to be at record highs with a weighted average of 93% in the top 20 metros. Our team's crisp execution resulted in a combined after-tax net operating contribution of $51 million for residential and BPL mortgage banking. This was driven by record residential loan purchase commitments, continued momentum in business purpose lending and execution of three securitizations exceeding $1 billion in issuance across Redwood Residential and CoreVest. Lock volumes in the first quarter rose 22% to $4.6 billion as mortgage rates rose during the quarter, but much less precipitously than benchmark interest rates. This led to a sustained uptick in refinance volumes, which represented 62% of our total locks for the quarter. We were able to place one of our two securitizations during the quarter via reverse inquiry and settled $1.4 billion of whole loan sales. As an example, the loans underlying our most recent securitization had an average age of approximately 45 days. This went back by $361 million in jumbo loans. During the first quarter, we achieved several milestones on our technology road map, including the onboarding of the majority of our Sequoia securitizations on to DVO 1, a third-party solution for accessing, reporting and analyzing standardized loan-level data for our Sequoia securitizations. This was an important enhancement to our original Rapid funding program rolled out last year, which was successful in facilitating $274 million of purchases from an initial group of participating sellers. Overall, we originated $386 million of business purpose loans during the quarter, comprised of $253 million of single-family rental loans and $133 million of bridge loans. While SFR loan production was down from a seasonally strong fourth quarter, and bridge fundings rose 33%, driven by increased usage in lines of credit and initial fundings on several recently completed build-for-rent financings. In all, 71% of originations in the first quarter were from repeat customers. We deployed $73 million net of financing into new investments during the quarter, primarily new issue CoreVest SFR securities and newly originated Bridgeland. Combined 90-plus delinquencies across our Sequoia and CoreVest securitization platforms now stand below 2%, and 90-plus day bridge delinquencies are below 3.5%, significant outperformance versus the marketplace. Since January, we have completed calls on three Sequoia transactions totaling $75 million in loans and plan to call several others throughout the remainder of the year. Contributing to GAAP earnings of $0.72 per share for the quarter and generating a 10% economic return on book value for the quarter. After the payment of our $0.16 dividend, which we increased by 14% in the first quarter, our book value increased 9% during the quarter to $10.76 per share. Moving forward, we generally expect margins to normalize back toward levels that still achieve a 20%-plus return on capital. At CoreVest, mortgage banking income normalized during the quarter while continuing to generate very strong operating returns on capital of nearly 30%, driven in part by marginal tightening on securitization execution. In relation to the three Sequoia deals we've called through April, we acquired $75 million of jumbo loans on to our balance sheet. Related to these calls, we expect to record GAAP realized gains of $7 million associated with the underlying securities, the majority of which will not flow through book value, and a net book value benefit of approximately $2 million versus our December 31st fair values, which is inclusive of estimated loan premium. Inclusive of these recent calls, we estimate over $600 million in loans underlying our securities could be callable in 2021. Shifting to the tax side, we had REIT taxable income of $0.09 per share in the first quarter and $0.47 per share of taxable income at our TRS, again driven by income from our mortgage banking operations. We ended the first quarter with unrestricted cash of $426 million. After allocating additional working capital to our mortgage banking operations during the first quarter to support growing loan volumes, and net of other corporate and risk capital, we estimate we had approximately $225 million of capital available for investment at March 31st. Our non-recourse leverage ratio increased to 1.9 times at March 31st from 1.3 times at the end of 2020, and total leverage in our investment portfolio remained consistent from the prior quarter at around 0.9 times. While returns from our operating businesses well exceeded 20% in the first quarter, we expect these returns to normalize during the remainder of the year, particularly for residential mortgage banking as our capital allocation now reflects a more steady state pipeline and levels of loan inventory on balance sheet. Cash flow expectations generally improved across the portfolio, and inclusive of our previously reported 5% fair value increase in our securities portfolio during the quarter, we now estimate go forward returns relative to our March 31st GAAP basis to be between 10% and 11%, inclusive of potential upside from potential borrowing costs in the second half of the year.

Driven by strong operating income and continued improvement in portfolio valuations, our GAAP earnings were $0.72 per diluted share for the first quarter as compared to $0.42 per diluted share in the fourth quarter. Contributing to GAAP earnings of $0.72 per share for the quarter and generating a 10% economic return on book value for the quarter.

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Local currency sales growth was 27%, and we had very strong broad-based growth in all regions and most product lines. With the exception with this exceptional sales growth and combined with focused execution of our margin initiatives, we achieved a 45% growth in adjusted operating income and 53% increase in adjusted EPS. Sales were $924.4 million in the quarter, an increase of 27% in local currency. On a U.S. dollar basis, sales increased 34% as currency benefited sales growth by 7% in the quarter. The PendoTECH acquisition contributed approximately 1% to sales growth in the quarter. Local currency sales increased 29% in the Americas, 23% in Europe, and 28% in Asia/Rest of World. Local currency sales increased 35% in China in the quarter. Local currency sales grew 23% for the first six months with a 22% increase in the Americas, 18% in Europe, and 28% growth in Asia/Rest of World. For the second quarter, laboratory sales increased 35%, industrial increased 20%, with core industrial up 27% and product inspection up 9%. Food retail increased 9% in the quarter. Laboratory sales increased 27% and industrial increased 19% with core industrial up 27% and product inspection up 7%. Food Retail increased 11% for the first six months. Gross margin in the quarter was 58.1%, a 50 basis point increase over the prior-year level of 57.6%. R&D amounted to $42.6 million in the quarter, which is a 28% increase in local currency over the prior period. SG&A amounted to $239 million, a 20% increase in local currency over the prior year. Adjusted operating profit amounted to $255.3 million in the quarter, a 45% increase over the prior-year amount of $176.6 million. Adjusted operating margins increased 200 basis points in the quarter to 27.6%. Currency benefited operating profit growth by approximately 7% but had little impact on operating margins. Operating -- I'm sorry, amortization amounted to $16.2 million in the quarter. Interest expense was $10.4 million in the quarter and other income in the quarter amounted to $2.7 million primarily reflecting non-service-related pension income. Our effective tax rate before discrete items and adjusted for the timing of stock option deductions was 19.5%. Fully diluted shares amounted to $23.5 million in the quarter, which is a 3% decline from the prior year. Adjusted earnings per share for the quarter was $8.10, a 53% increase over the prior-year amount of $5.29. Currency benefited adjusted earnings per share growth by approximately 7% in the quarter. On a reported basis in the quarter, earnings per share was $7.85 as compared to $5.22 in the prior year. Reported earnings per share in the quarter includes $0.19 of purchased intangible amortization, $0.03 of restructuring, and $0.03 due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises. Local currency sales grew 23% for the six months. Adjusted operating income increased 47% with margins up 330 basis points. Adjusted earnings per share grew 58% on a year-to-date basis. In the quarter, adjusted free cash flow amounted to $233.3 million, which is an increase of 41% on a per-share basis as compared to the prior year. DSO was 36 days, which is four days less than the prior year. ITO came in at 4.6 times, which is slightly better than last year. For the first half, adjusted free cash flow amounted to $372.2 million, an increase of 75% on a per-share basis as compared to the prior year. For the full year 2021, with the benefit of our strong Q2 results and improved outlook for the remainder of the year, we now expect local currency sales growth for the full year to be approximately 15%. This compares to our previous guidance range of 10% to 12%. We expect full-year adjusted earnings per share to be in the range of $32.60 to $32.90, which is a growth rate of 27% to 28%. This compares to previous guidance of adjusted earnings per share in the range of $31.45 to $31.90. With respect to the third quarter, we would expect local currency sales growth to be in the range of 11% to 13% and expect adjusted earnings per share to be in a range of $8.12 to $8.27, a growth rate of 16% to 18%. In terms of free cash flow for the year, we now expect it to be in the range of $770 million. We expect to repurchase in total one billion in shares in 2021, which should put us in the range of a net debt-to-EBITDA leverage ratio of approximately 1.5 times at the end of the year. With respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3% in 2021 and 2% in the third quarter. In terms of adjusted EPS, currency will benefit growth by approximately 3% in the quarter and approximately 3.5% for the full year 2021. Let me make some comments on our operating businesses, starting with Lab, which had an outstanding growth of 35% in the quarter. In terms of our industrial business, core industrial did very well in the quarter with a 27% increase in sales. Product Inspection had increased momentum and solid sales growth of 9% in the quarter. Food retailing grew 9% in the quarter. Sales in Europe increased 23% in the quarter with excellent growth in lab, core industrial, and food retail. Americas increased 29% in the quarter with excellent growth in lab and core industrial. Finally, Asia and the rest of the world grew 28% in the quarter with outstanding growth in Laboratory and Industrial. Service and consumables performed very well and were up 23% in the quarter. While our goal this year is to launch 2,000 webinars in local languages, which helps to overcome the limitations we face with customer interactions due to the pandemic. We have professionalized the delivery of the webinars and have expanded our topics to include items such as compliance, productivity, Industry 4.0, and data integrity.

Sales were $924.4 million in the quarter, an increase of 27% in local currency. Adjusted earnings per share for the quarter was $8.10, a 53% increase over the prior-year amount of $5.29. On a reported basis in the quarter, earnings per share was $7.85 as compared to $5.22 in the prior year. For the full year 2021, with the benefit of our strong Q2 results and improved outlook for the remainder of the year, we now expect local currency sales growth for the full year to be approximately 15%. We expect full-year adjusted earnings per share to be in the range of $32.60 to $32.90, which is a growth rate of 27% to 28%. With respect to the third quarter, we would expect local currency sales growth to be in the range of 11% to 13% and expect adjusted earnings per share to be in a range of $8.12 to $8.27, a growth rate of 16% to 18%.

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As a result, we are increasing our 2021 and 2022 revenue synergy targets to $600 million and $700 million, respectively. I'm also pleased to share that we divested our remaining minority position in Capco in April, netting a very positive return for our shareholders in over $350 million in proceeds for our remaining stake. We are quickly becoming one of only eight companies in the S&P 500 with revenues approaching $14 billion, growing more than 7% with an already high and expanding mid-40s EBITDA margins. In banking, new sales grew 17% year-over-year, reflecting a 24% CAGR since the fInvestor Relationsst quarter of 2019 as our investments in new solutions continue to yield impressive results not only in our traditional business but in emerging areas as well. For example, Green Dot, the world's largest prepaid debit card company with over $58 billion in annual volume, chose to expand our relationship this quarter to now include one of our B2B solutions to support theInvestor Relations commercial customers as well as our online chat and social media solution for customer care to serve theInvestor Relations mobile digital bank. And I'm pleased to share that 40% of our earlier wins are already live due to our software's elegant and modular design. We spent the past year migrating more than 1,000 of our issuing clients to this platform and have also seen strong demand from new clients where we've already installed more than 300 new financial institutions since the launch of this solution. We revamped our go-to-market strategy, significantly improving new sales results as evidenced by our exceptional 76% growth. New sales were up 39% over the fInvestor Relationsst quarter of 2019, translating to an 18% CAGR over the past two years. In this strategic takeaway, we will cross-sell merchant processing to CIT's over 45,000 customers, expanding on an already successful relationship with our banking segment. We also continue to expand our leading ISV partner network, adding 20 new ISVs in the U.K. this quarter as well as several more in the U.S. and Canada that span a diverse range of verticals from retail, hospitality, salons and spas to event ticketing, education, property management and many others. As an example, we won 80 new global e-commerce clients this quarter, more than doubling our new sales from last year. To keep pace with the demand, we are investing to grow our sales force by over 300 more professionals this year. As we think about newly formed high-growth sectors, FIS is the leading acquInvestor Relationser for cryptocurrency, with revenue from this vertical growing by 5 times over last year. We serve five of the top 10 digital asset exchanges and brokerages globally, including innovators like Coinbase and BitPay. We processed over 1.8 billion transactions on NAP during the fInvestor Relationsst quarter and continue to expect accelerating growth now that we are aggressively selling in market. We simultaneously improved margins and moved the business to over 70% reoccurring revenue. During the fInvestor Relationsst quarter, average deal size increased 36% with new logos representing 30% of new sales, clearly showing that we are winning share. New sales of our SaaS-based reoccurring revenue solutions are also very strong, increasing by 57% this quarter. Starting on Slide 11, I will begin with our fInvestor Relationsst quarter results, which exceeded our expectations across all metrics to generate an adjusted earnings per share of $1.30 per share. On a consolidated basis, revenue increased 5% in the quarter to $3.2 billion, driven by better-than-expected performances in each of our operating segments. Adjusted EBITDA margins expanded by 10 basis points to 41%. We continue to make excellent progress on synergies exiting the quarter at $300 million in run rate revenue synergies, an increase of 50% over the fourth quarter's $200 million, accelerating revenue synergy attainment driven primarily by ongoing traction and ramping volumes within our bank referral and ISV partner channels as well as cross-sell wins related to our new solutions and geographic expansion. Given our progress to date and robust pipeline, we're increasing our revenue synergy target for 2021 by 50% or $200 million to $600 million; and for 2022 by $150 million to $700 million. We have doubled our initial cost synergy target of $400 million, exiting the quarter with more than $800 million in total cost synergies. This includes approximately $425 million in operating expense synergies. Our Banking segment accelerated to 7% on a GAAP basis or 6% organically, up from 5% growth last quarter. Our issuing business grew 10% in the quarter, driven primarily by revenue growth from PaymentsOne, increased network volumes and economic stimulus. Capital Markets increased 5% in the quarter or 3% organically, reflecting strong sales execution and growing recurring revenue. In Merchant, we saw a nice rebound, with growth of 3% in the quarter or 1% organically, accelerating 10 points sequentially as compared to the fourth quarter. We ultimately exited the quarter generating approximately 70% revenue growth during the last week of March, including five percentage points of positive yield contribution. Based on March exit rates and second quarter comparisons, we expect merchant organic revenue growth of 30% to 35% in the second quarter. We returned approximately $650 million to shareholders in the quarter through our increased dividend and share repurchases. Starting in March, we bought back approximately 2.8 million shares at an average price of $143 per share. Beyond this return of capital, we also successfully refinanced a portion of our higher interest rate bonds, which extended our average duration by a year and lower expected interest expense for the year by about $60 million to approximately $230 million. Total debt decreased to $19.4 million -- $19.4 billion for a leverage ratio of 3.6 times exiting the quarter, and we remain on track to end the year below 3 times leverage. For the second quarter, we expect organic revenue growth to continue to accelerate to a range of 13% to 14%, consistent with revenue of $3.365 billion to $3.39 billion. As a result of the high contribution margins in our business, we expect adjusted EBITDA margin to expand by more than 400 basis points to approximately 44%. This will result in adjusted earnings per share of $1.52 to $1.55 per share. For the full year, we now anticipate revenue of $13.65 billion to $13.75 billion or an increase of $100 million at the midpoint as compared to our prior guidance driven primarily by accelerating revenue synergies. We continue to expect to generate adjusted EBITDA margins of approximately 45%, equating to an EBITDA range of $6.075 billion to $6.175 billion. With our improved outlook, successful refinancing and share repurchase to date, we are increasing our adjusted earnings per share guidance to $6.35 to $6.55 per share, representing year-over-year growth of 16% to 20% and an increase of $0.15 at the midpoint above our prior guidance.

Starting on Slide 11, I will begin with our fInvestor Relationsst quarter results, which exceeded our expectations across all metrics to generate an adjusted earnings per share of $1.30 per share. On a consolidated basis, revenue increased 5% in the quarter to $3.2 billion, driven by better-than-expected performances in each of our operating segments.

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We experienced ongoing strength in metals pricing during the first quarter, led by multiple price increases for carbon steel products, along with improving demand in many markets, and leveraged our decentralized operating structure, small order sizes and diversification of products, end markets and geographies to achieve record gross profit margin for the third consecutive quarter of 33.6%, up 60 basis points from the fourth quarter of 2020 and up 330 basis points from the first quarter of 2020. Our record quarterly gross profit margin, combined with average selling prices well above our expectations and our continued focus on expense control, contributed to record pre-tax income of $359 million in the first quarter of 2021, up over 100% from the prior quarter and up over 300% from the prior year period. Our quarterly earnings per diluted share of $4.12 were also a record and substantially exceeded our outlook. Our strong earnings and effective working capital management resulted in cash flow from operations of $161.8 million in the first quarter of 2021 despite $182.8 million of working capital investment. We improved our inventory turn rate to 5.4 times, surpassing our 2020 annual rate and companywide turn goal of 4.7 times. Our 2021 capital expenditure budget of $245 million includes new buildings and other projects to expand, upgrade and maintain many of our existing operating facilities. However, when factoring in project delays and extended lead times for equipment due to COVID-19, we believe our potential cash flow outlays for our capital expenditure will be closer to $300 million in 2021 due to the prior year holdover spending. During the first quarter of 2021, we invested $43.7 million back into our business through capital expenditures, including several growth opportunities to address and exceed our customers' and suppliers' needs. During the first quarter of 2021, we paid $44.8 million in dividends to our stockholders. We've maintained our payment of regular quarterly dividends for 62 consecutive years without ever suspending payments or reducing our dividend rate. In fact, we've increased our dividend 28 times since our 1994 IPO, including the most recent increase of 10% in the first quarter of 2021. At March 31, 2021, approximately 2.8 million shares remained available for repurchase under our stock repurchase program. Strong demand conditions in the majority of our end markets resulted in our tons sold increasing 11.3% compared to the fourth quarter, which was within our guidance range of up 10% to 12% and above the typical seasonal improvement in shipping volumes we experienced in the first quarter. While demand is healthy and continues to improve in most markets, our first quarter shipments did not reach pre-pandemic levels and were down 4% from the first quarter of 2020. However, on a per day basis, our tons sold were down only 2.5%. Our average selling price increased 20% compared to the fourth quarter of 2020, exceeding our guidance of up 12% to 14% by a significant margin. These robust demand and pricing conditions contributed to an all-time high quarterly gross profit margin of 33.6%. On a non-GAAP FIFO basis, which we believe is the best measure of our day-to-day operating performance, we achieved a record gross profit margin of 37.1%, an increase of 350 basis points compared to the prior quarter and up 600 basis points from the first quarter of 2020. We entered the second quarter of 2021 with strong demand and pricing momentum that creates an environment for us to optimize our model and deliver strong results. The significant increase in metal pricing and healthy demand resulted in our first quarter sales increasing 33% over the fourth quarter of 2020. Compared to the prior year period, our first quarter sales were up over 10%, supported by the strong pricing momentum for most carbon steel products. As Jim and Karla mentioned, the strong pricing environment, along with our focus on higher-margin orders and continued investments in value-added processing capabilities, collectively resulted in record quarterly gross profit of $953.7 million and a record gross profit margin of 33.6% in the first quarter of 2021. We incurred LIFO expense of $100 million in the first quarter of 2021. This compares to LIFO income of $20 million in the first quarter of 2020 and LIFO expense of $15.5 million in the fourth quarter of 2020. At the end of the first quarter, our LIFO reserve on our balance sheet was $215.6 million. We revised our annual LIFO expense estimate to $400 million from $340 million primarily due to higher-than-anticipated costs for certain carbon steel products. As such, our current projected LIFO expense for the second quarter of 2021 is $100 million. Our SG&A expense was generally consistent with traditional seasonal trends, increasing $54.9 million or 11.8% compared to the fourth quarter of 2020 due to strong volume and pricing momentum. In comparison to the prior year period, SG&A expense was roughly flat due to lower wages as a result of reduced head count, which was down approximately 8% year-over-year, and was offset by higher incentive compensation due to record earnings levels in the first quarter of 2021 and to a lesser extent, inflationary increases. Our non-GAAP pre-tax income of $357.1 million in the first quarter of 2021 was the highest in our company's history and represents an increase of $136.5 million or 61.9% from the first quarter of 2020 due to favorable demand and pricing conditions, strong execution and diligent expense management. Our non-GAAP pre-tax income margin of 12.6% was also a record and exceeded the prior year period by 400 basis points. Our effective income tax rate for the first quarter of 2021 was 25.3%, up from 24.3% in the first quarter of 2020 mainly due to higher profitability. We currently anticipate a full year 2021 effective income tax rate of 25%. As a result of all these factors, we generated record quarterly earnings per share of $4.12 in the first quarter of 2021 compared to $0.92 in the first quarter of 2020. On a non-GAAP basis, our first quarter earnings of $4.10 per share significantly exceeded our outlook and were up 104% from $2.01 in the fourth quarter of 2020 and up 67.3% from $2.45 in the first quarter of 2020. We generated strong cash flow from operations of $161.8 million during the first quarter of 2021 due to our profitable operations and effective working capital management, including our focus on inventory turns. As of the end of the first quarter, our total debt outstanding was $1.66 billion, resulting in a net debt-to-EBITDA multiple of 0.85. We had no borrowings outstanding on our $1.5 billion revolving credit facility, providing us with ample liquidity to continue executing on all areas of our capital allocation strategy while maintaining our investment-grade credit rating. Despite these factors, we estimate tons sold will be flat to up 2% in the second quarter of 2021 compared to the first quarter of 2021. Since current metal prices are substantially higher than the average selling price in the first quarter of 2021, we estimate our average selling price per ton sold for the second quarter of 2021 will be up 5% to 7%. Given the strong demand and pricing fundamentals, we anticipate continued strength in our gross profit margin in the second quarter of 2021. Based on these expectations, we currently anticipate non-GAAP earnings per diluted share in the range of $4.20 and to $4.40 for the second quarter of 2021.

Our quarterly earnings per diluted share of $4.12 were also a record and substantially exceeded our outlook. We entered the second quarter of 2021 with strong demand and pricing momentum that creates an environment for us to optimize our model and deliver strong results. As a result of all these factors, we generated record quarterly earnings per share of $4.12 in the first quarter of 2021 compared to $0.92 in the first quarter of 2020. On a non-GAAP basis, our first quarter earnings of $4.10 per share significantly exceeded our outlook and were up 104% from $2.01 in the fourth quarter of 2020 and up 67.3% from $2.45 in the first quarter of 2020. Since current metal prices are substantially higher than the average selling price in the first quarter of 2021, we estimate our average selling price per ton sold for the second quarter of 2021 will be up 5% to 7%. Given the strong demand and pricing fundamentals, we anticipate continued strength in our gross profit margin in the second quarter of 2021. Based on these expectations, we currently anticipate non-GAAP earnings per diluted share in the range of $4.20 and to $4.40 for the second quarter of 2021.

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Our GAAP results for the first quarter were also $1.28 per share versus $0.88 per share in the first quarter of 2020. Beginning was out nearly $2 billion of Clean Energy Future programs, which have moved from approval to execution. Last week, the New Jersey Board of Public Utilities voted unanimously to award a continuation of the full $10 per megawatt hour zero-emission certificates, I'll just call them ZECs from now on, for all three New Jersey nuclear units, that would be Hope Creek, Salem number one and Salem number two through May of 2025. I congratulate PSEG Nuclear for being recognized by as an industry leader in operational reliability, one of only two nuclear fleets across the industry with no scrams over the past 365 days. During the quarter, the BPU also approved PSEG's 25% equity investment in Orsted's Ocean Wind project. PSEG eagerly encourages an advocate for a national approach to accelerate economy wide, net zero emissions even sooner than 2050 in a constructive manner that expands green jobs by investing in clean energy infrastructure. Following the BPU approval of our $700 million AMI proposal in January, we have begun implementation of the 4-year program. Last month, FERC promulgated a new proposed rule to limit the 50 basis point RTO return on equity incentive to a 3-year period. Stakeholder meetings are being conducted to consider a solar financial incentive program that will permanently replace the Solar Renewable Energy Certificate, or SREC program, and the Temporary Transitional Renewable Energy Certificate, or TRAC program, which was instituted in 2020 upon the state attainment of 5.1% of kilowatt hours sold from solar generation fee. So to wrap up my remarks, we are reaffirming non-GAAP operating earnings guidance for the full year of 2021 of $3.35 to $3.55 per share. We are on track to execute PSEG's 5-year $14 billion to $16 billion capital program through 2025 and had the financial strength to fund it without the need to issue new equity. Over 90% of the current capital program is directed to PSE&G, which is expected to produce 6.5% to 8% compound annual growth in rate base over the '21 to '25 period, starting from PSEG's year-end 2020 rate base of $22 billion. As we've noted previously, PSE&G's considerable cash-generating capabilities are supported by over 90% of its capital spending, continuing to receive either formula rate last based or current rate recovery of and on capital. As Ralph mentioned, PSEG reported non-GAAP operating earnings for the first quarter of 2021 of $1.28 per share versus $1.03 per share in last year's first quarter. PSE&G, as shown on Slide 15, reported net income for the first quarter 2021 of $0.94 per share compared with $0.87 per share for the first quarter of 2020, up 8% versus last year. Results improved by $0.07 per share, driven by revenue growth from ongoing capital investment program and favorable pension OPEB results. Transmission capital spending added $0.02 per share of the first quarter net income compared to the first quarter of 2020. On the distribution side, gas margin improved by $0.03 per share over last year's first quarter, driven by the scheduled recovery of investments made under the second phase of the Gas System Modernization Program. Electric margin was $0.01 per share favorable compared to the first quarter of 2020 on a higher weather-normalized residential volume. O&M expense was $0.02 per share unfavorable compared to the first quarter of 2020, reflecting higher costs from several February snowstorms. Depreciation expense increased by $0.01 per share, reflecting higher plant in service, and pension expense was $0.02 per share favorable compared to the first quarter of 2020. Flow through taxes and other were $0.02 per share favorable compared to the first quarter of 2020. Winter weather, as measured by heating degree days, was 4% milder than normal, but was 18% colder than the mild winter experienced in the first quarter of 2020. For the trailing 12 months ended March 31, total weather-normalized sales reflected the higher expected residential and lower commercial and industrial sales observed in 2020 due to the economic impacts of COVID-19. Total electric sales declined by 2%, while gas sales increased by approximately 1%. PSE&G invested approximately $600 million in the first quarter and is on track to fully execute on its planned 2021 capital investment program of $2.7 billion. And as of March 31, PSE&G has recorded a regulatory asset of approximately $60 million for net incremental costs, which includes $35 million for incremental gas bad debt expense. With respect to subsidiary guidance for PSE&G, our forecast of net income for 2021 is unchanged at $1.410 billion to $1.470 billion. In the first quarter of 2021, PSEG Power reported net income of $161 million or $0.32 per share, non-GAAP operating earnings of $163 million or $0.32 per share, and non-GAAP adjusted EBITDA of $321 million. This compares to first quarter 2020 net income of $13 million, non-GAAP operating earnings of $85 million and non-GAAP adjusted EBITDA of $201 million. The expected increase in PJM's capacity revenue improved non-GAAP operating earnings comparisons by $0.03 per share compared with last year's first quarter. Higher generation in the 2021 first quarter added $0.01 per share due to the absence of the first quarter 2020 unplanned [on one average. ] And favorable market conditions influenced by February's cold weather benefited results by $0.03 per share compared to last year's first quarter. We continue to forecast a $2 per megawatt hour average decline in recontracting for the full year recognizing that the shape of the annual average change favors the winter months of the first quarter. The weather-related improvement in total gas send out to commercial and industrial customers increased results by $0.04 per share. O&M expense was $0.03 per share favorable in the quarter, benefiting from the absence of first quarter 2020 outages at Bergen two and Salem 1, and lower depreciation and lower interest expense combined to improve by $0.01 per share versus the quarter ago -- or the year ago quarter. Generation output increased by just under 1% to total 13.3-terawatt hours versus last year's first quarter when Salem Unit one experienced a month-long unplanned outage. PSEG Power's combined cycle fleet produced 4.7-terawatt hours, down 8%, reflecting lower market demand in the quarter. The Nuclear fleet produced 8.2-terawatt hours, up 3%, and operated at a capacity factor of 98.8% for the first quarter, representing 62% of total generation. PSEG Power is forecasting generation output of 36 to 38 terawatt hours for the remaining three quarters of 2021 and has hedged approximately 95% to 100% of this production at an average price of $30 per megawatt hour. Gross margin for the first quarter rose to approximately $34 per megawatt hour compared to $30 per megawatt hour in the first quarter of 2020, which contained one of the mildest winters in recent history. And this winter's temperatures were 12% cooler on average and resulted in better market conditions compared to the first quarter of 2020. Power's average capacity prices in PJM were higher in the first quarter of 2021 versus the first quarter of 2020 and will remain stable at $168 per megawatt hour -- per megawatt day through May of 2022. In New England, our average realized capacity price will decline slightly to $192 per megawatt day, beginning June 1. However, Power's cleared capacity will decline by 383 megawatts with the scheduled retirement of the Bridgeport Harbor Unit 3, achieving our goal of making Power's fleet completely coal free. Over 75% of PSEG Power's expected gross margin in 2021 is secured by our fully hedged position of energy output, capacity revenue set in previous auctions and the opportunity to earn a full year of ZEC revenues and certain ancillary service payments such as reactive power. The forecast of PSEG Power's non-GAAP operating earnings and non-GAAP adjusted EBITDA for 2021 remain unchanged at $280 million to $370 million and $850 million to $950 million, respectively. For the first quarter of 2021, Enterprise and Other reported net income of $10 million or $0.02 per share for the first quarter of 2021 compared to a net loss of $5 million or $0.01 per share for the first quarter of 2020. For 2021, the forecast for PSEG Enterprise and Other remains unchanged at a net loss of $15 million. With respect to financial position, PSG ended the quarter with $803 million of cash on the balance sheet. During the first quarter, PSE&G issued $450 million of 5-year secured medium-term notes at 95 basis points and $450 million of 30-year secured medium-term notes at 3%. In addition, we retired a $300 million, 1.9% medium-term note at PSE&G that matured in March. In March of 2021, PSEG closed on a $500 million, 364-day variable rate term loan agreement, following the January prepayment of a $300 million term loan initiated in March of 2020. For the balance of the year, we have approximately $950 million of debt at PSEG Power scheduled to mature in June and September. $300 million of debt scheduled to mature at the parent in November and $134 million of debt at PSE&G scheduled to mature in June. As Ralph mentioned earlier, we are affirming our forecast of non-GAAP operating earnings for the full year of 2021 of $3.35 to $3.55 per share.

Our GAAP results for the first quarter were also $1.28 per share versus $0.88 per share in the first quarter of 2020. So to wrap up my remarks, we are reaffirming non-GAAP operating earnings guidance for the full year of 2021 of $3.35 to $3.55 per share. We are on track to execute PSEG's 5-year $14 billion to $16 billion capital program through 2025 and had the financial strength to fund it without the need to issue new equity. As Ralph mentioned, PSEG reported non-GAAP operating earnings for the first quarter of 2021 of $1.28 per share versus $1.03 per share in last year's first quarter. As Ralph mentioned earlier, we are affirming our forecast of non-GAAP operating earnings for the full year of 2021 of $3.35 to $3.55 per share.

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The first quarter of 2020 marked the second consecutive quarterly adjusted profit for Teekay as we recorded consolidated adjusted net income of $25 million or $0.25 per share compared to an adjusted net loss of $13 million or $0.13 per share in the same period last year. We also generated total adjusted EBITDA of $342 million, an increase of $128 million or 59% from the same period in the prior year. As a reminder, the Q1 2019 results included the contribution from the 14% ownership stake in Altera Infrastructure, formerly Teekay Offshore, which was sold in May 2019. It is also important to note that these figures only include $11 million of the $67 million upfront payment received for the Foinaven FPSO contract we entered into in late March. Teekay Parent generated positive adjusted EBITDA of $5 million, which includes EBITDA from our directly owned assets and cash distributions from our publicly traded daughter entities. However, based on US GAAP and our definition of the adjusted EBITDA, only $11 million of the $67 million upfront payment from the new Foinaven FPSO contract was included in our Q1 revenues. However, the remaining $56 million has been included in Teekay Parent's free cash flow. As a result, Teekay Parent's free cash flow increased to $53 million, a significant improvement from negative $14 million in the same period of the prior year. The increase was also a result of lower interest expense due to bond repurchases over the past year and our bond refinancing completed in May 2019; a 32% increase in Teekay LNG's quarterly cash distribution; and lower G&A expenses. Since reporting back in February, we have been busy executing on our strategic priorities, which included the new bareboat contract for the Foinaven FPSO that covers the vessel all the way through to its eventual retirement and the monetization of our TGP incentive distribution rights or IDRs in exchange for 10.75 million newly issued TGP common units. We eliminated the TGP IDRs in exchange for 10.75 million newly issued TGP common units, which we believe is beneficial to both parties. The transaction also increases our economic interest in TGP from 34% to approximately 42%, including our GP stake, and increases Teekay Parent's free cash flows by almost $11 million per annum based on the current TGP distribution level. In late March, we secured a new up to 10 year bareboat contract on the Foinaven FPSO that effectively covers the remaining life and the eventual green recycling of the unit. The new contract includes an upfront payment of $67 million, which was received in early April; a nominal per day fee for the contract life that effectively covers any ancillary costs; and a lump sum payment at the end of the contract term that is expected to cover any cleanup and green recycling costs of the unit. Lastly, the Hummingbird FPSO continues to operate on its fixed rate contract and is currently producing between 7,500 barrels and 8,500 barrels per day. Teekay LNG Partners reported record high adjusted net income during the quarter, generating total adjusted EBITDA of $188 million and adjusted net income of $52 million or $0.58 per unit, up significantly compared to the same period of the prior year as a result of a complete quarter contribution in Q1 from its fully delivered LNG fleet. TGP has also reaffirmed its 2020 adjusted EBITDA and adjusted net income guidance, with adjusted net income expected to increase by 36% to 60% in 2020 versus 2019. Since reporting in February, TGP has secured new time charter contracts on three 52% owned LNG carriers and is now 100% fixed in 2020 and 94% fixed in 2021, and TGP has also repaid its NOK bond this week using existing cash. Additionally, TGP continues to execute on its balanced capital allocation strategy, which includes prioritizing balance sheet delevering for now, alongside a second consecutive year of over 30% increase in quarterly cash distributions with a 32% increase in May 2020. As highlighted on the graph on this slide, TGP continues to delever its balance sheet and has also opportunistically bought back approximately $44 million of stock since the program was announced in December 2018 at an average price of $12.16 per unit. With a strengthening financial foundation and deleveraging that is expected to provide financial flexibility, market-leading positions and a very compelling valuation at a 4 times PE ratio based on the midpoint of its 2020 financial guidance, we believe TGP has significant long-term value potential which benefits Teekay, given our full alignment of interest and position as the largest common unitholder. For every $1 per unit increase in TGP's unit price, Teekay's equity interest would increase by $0.37 per share or 12% based on yesterday's closing price of $3.11 per share. Teekay Tankers reported the highest quarterly adjusted profit, generating total adjusted EBITDA of $155 million, up from $63 million in the same period of the prior year, and adjusted net income of $110 million or $3.27 per share in the first quarter, an improvement from $15 million or $0.44 per share in the same period of the prior year. We also expect TNK's Q2 results to be strong based on the spot rates secured so far in Q2, with 69% of Q2 Suezmax days fixed that $52,100 per day and 62% of our Q2 Aframax size vessels fixed at $33,600 per day compared to $49,100 per day and $34,500 per day in the first quarter, respectively. TNK reduced its net debt by approximately $200 million or over 20% since the beginning of the year, and increased its total liquidity to $368 million and have subsequently continued to make meaningful progress on both fronts. In total, TNK has now fixed up 13 vessels on fixed rate contracts totaling approximately $170 million of forward fixed rate revenues. These new contracts also reduce TNK's free cash flow breakeven to approximately $10,500 per day, which is expected to enable TNK to create shareholder value in almost any tanker market. We also take a long-term view on TNK's business and prospects TNK has significantly grown its net asset value, earning over $240 million of free cash flow in just two quarters, which is compelling relative to its market cap of $540 million and its net debt balance of $730 million, and it has an industry-leading 20% earnings per share yield in Q1 2020 based on its closing share price yesterday or 80% on an annualized basis. For every $1 per unit increase in TNK's unit price, Teekay's equity interest would increase by $0.10 per share or 3% based on yesterday's closing price of $3.11 per share. In summary, for every $1 increase in TGP and TNK's share prices, Teekay's equity interest would increase by $0.47 per share or 15% based on yesterday's closing price of $3.11 per share. Looking at the graph on the slide, Teekay Corporation has reduced its pro forma consolidated net debt by $830 [Phonetic] million or 19% since the beginning of 2019 and reduced its pro forma net debt to EBITDA from a peak of 9 times to 4.5 times, while increasing our pro forma consolidated liquidity to over $900 million. We have also reduced Teekay Parent's pro forma net debt by approximately $100 million or 25% since the beginning of 2019 and reduced our daughter debt guarantees to under $90 million as of March 31, which we expect will be completely eliminated by the end of 2020, while also holding a healthy pro forma liquidity position of $150 million. For instance, our latest LNG carrier newbuildings produce about 50% less CO2 emissions per cubic meter of LNG transported. As our industry has set itself the challenge of progressively becoming carbon-neutral by 2050, we have an enormous task ahead of us. In closing, with our balance sheet continuing to strengthen, total pro forma liquidity of over $900 million for the Teekay Group, extensive contracted revenue from Teekay LNG and higher contracted revenue and strong spot rates to date at Teekay Tankers and with no committed growth capex or significant upcoming debt maturities, we believe that the Teekay Group is financially well-positioned for both any potential market volatility in the near term and the longer-term future of marine energy transportation.

The first quarter of 2020 marked the second consecutive quarterly adjusted profit for Teekay as we recorded consolidated adjusted net income of $25 million or $0.25 per share compared to an adjusted net loss of $13 million or $0.13 per share in the same period last year.

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We furloughed 11,000 of our 15,000 employees globally. In April, our weekly revenue had fallen to as low as 10% of the prior year revenue, the low point for KAR Global performance. Changes in the business operations and especially, all of our support functions led us to permanently eliminate 5,000 positions, reducing our annual payroll costs by over $150 million. Our SG&A was down year-over-year in Q4 by $25 million. This decrease was achieved despite adding $5 million of SG&A in the fourth quarter related to BacklotCars. By moving our U.S. customers from the TradeRev application to the BacklotCars, we will be moving from a timed auction format to a 24/7 bid-ask marketplace. To sum it all up, after 90 days of owning BacklotCars, we are pleased with the performance and the fit with KAR. We lost approximately $35 million in those two weeks as revenue was minimal and all employees were paid for two weeks despite all locations being closed. We had negative adjusted EBITDA of approximately $25 million for the month. We then saw a relatively fast rebound during May as weekly volumes rebounded to over 90% of the prior year, followed by June, where volumes and our financial performance exceeded the prior year. While volume started to decline in August, we finished the third quarter with volumes over 90% of 2019 levels for the quarter and adjusted EBITDA that was 8% above 2019 levels. We had gross profit of over 50% of net revenue and adjusted EBITDA margin that was 23.5% of total revenue. Unfortunately, the fourth quarter saw volumes dropped to 75% of the prior year, excluding acquisitions. Gross profit declined to 40% -- 46% of net revenue. In terms of SG&A, we're able to control cost and hold the SG&A below the prior year by $25 million. This was accomplished despite recording approximately $16 million in incentive pay in the fourth quarter compared to $7 million in the prior year. This increase in incentive pay reflects the proposal by management to adjust the threshold for payment to 50% from approximately 95% of target for 2020. The total payout for employees with annual incentive programs was approximately 70% of target for the year. We also recorded an adjustment to contingent purchase price related to the acquisitions of CarsOnTheWeb and Dent-ology, that was a net increase in expense of $4.7 million. The contingent purchase consideration and the write-off of goodwill totaling $25.5 million for our U.K. operations that we recorded earlier in the year are not tax deductible and increased our effective tax rate. As we look forward, we expect our effective tax rate to be approximately 30%, unless, the U.S. federal income tax rate is increased from current levels. We believe when volumes get back to 90% or more of 2019 levels, our business can generate gross profit of approximately 50% of net revenue with adjusted EBITDA margins in the mid 20% range. In summary, the only difference between the two weighted average diluted shares numbers is the conversion of the convertible preferred stock to common shares using the conversion price of $17.75 per share. We did buy back $10.2 million of common stock in the fourth quarter at an average price of $17.50 per share. We expect capital expenditures to be approximately $125 million, an increase from actual capital expenditures of $101 million in 2020.

We believe when volumes get back to 90% or more of 2019 levels, our business can generate gross profit of approximately 50% of net revenue with adjusted EBITDA margins in the mid 20% range.

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Q4 was another record for SmartSide as sales increased by 30% to $259 million and Siding EBITDA nearly doubled over -- year-over-year to $77 million. OSB prices remained exceptionally high throughout the quarter, resulting in $250 million in EBITDA for the OSB segment. As a result, LP ended 2020 with $2.8 billion in sales, $781 million in EBITDA, $660 million in operating cash flow and $4.31 in earnings per share. That plan included a three-year target of $165 million in cumulative EBITDA improvements from growth, operating efficiency and strategic sourcing. Today, I am proud to announce that we have exceeded this target a year ahead of schedule with $177 million in cumulative impact delivered in only two years. Phase 1 will be the conversion of our mill in Houlton, Maine from production of Laminated Strand Lumber and OSB to SmartSide. Houlton will add roughly 220 million square feet of SmartSide capacity with production beginning early in 2022. Phase 2 of the SmartSide capacity expansion strategy will be the conversion of our OSB mill in Sagola, Michigan. These two new facilities will add roughly 520 million square feet of additional SmartSide capacity and remove roughly 670 million feet of OSB capacity. The consensus for 2021 housing starts has climbed for the past several months and is now, in the year, 1.5 million. On a seasonally adjusted basis, December starts were at 1.6 million and permits were 1.7 million suggesting continued strength in new residential construction. As we have been keeping the mill ready for an eventual restart, the cost to resume production shall not exceed $12 million. Sagola's conversion will add roughly 300 million square feet to SmartSide capacity and remove roughly 420 million square feet of OSB capacity. While the exact timing of Sagola's conversion to SmartSide is still to be determined, the graph illustrates initial SmartSide production in the second half of 2023, which is consistent with an annual demand growth rate of 11%. The plan, once fully implemented, will increase total SmartSide capacity by roughly 520 million square feet or a little over 30%. The net effect of Houlton and Sagola's conversion and the Peace Valley restart will increase LP's OSB capacity by less than 100 million feet. Net sales increased by 60% to $860 million, primarily due to 30% growth of SmartSide and $246 million of higher OSB prices. The resulting EBITDA of $328 million is 7 times last year's result and translated nearly dollar for dollar to operating cash flow of $321 million with the benefit of $45 million in tax refunds. We further lowered our year-end share count to 106 million shares after spending $171 million in the quarter to buy back a little over 5 million shares, and with taxes as the only meaningful adjustment to net income, adjusted earnings per share was $2.01 compared to U.S. GAAP earnings per share of $2.34. Net sales increased by 21% to $2.8 billion and EBITDA increased to $781 million, which is 4 times last year's result. We grew SmartSide revenue by 15% and $481 million of revenue and EBITDA from higher OSB prices and generated $659 million in operating cash flow. Capital spending of $77 million ended up being about half our original pre-COVID guidance for 2020. The vast majority of this $77 million was spent on sustaining maintenance, which typically runs in the $80 million to $100 million range per year. As a result, we ended the year with $535 million in cash after paying $65 million in dividends and $200 million to repurchase shares. As Brad said, we exceeded our three-year target of $165 million in cumulative EBITDA impact a year early with $107 million from growth and $71 million from efficiency. The main takeaway here is that higher OSB prices and 30% SmartSide growth tell us all we need to know about the quarter. Having said that, and while not shown here, our South America segment had a record quarter with $50 million of sales and $13 million of EBITDA, representing increases of 32% and 62%, respectively even after adverse currency movements. The waterfalls on Slides 12 and 13 detail the year-over-year revenue and EBITDA growth in the Siding and OSB segments for the quarter. In broad strokes, the 30% revenue growth for the quarter reflects a 95% increase in retail revenue and a 20% increase in distribution revenue. And with an incremental margin of $0.51 on each additional dollar of revenue, this $59 million of SmartSide growth produced $30 million of additional EBITDA. With low SG&A and higher OEE more than offsetting the discontinuation of Fiber, the Siding segment EBITDA margin increased by 12 percentage points to 30%. However, given the operating leverage and pricing power inherent in the business, we are raising our long-term target for the Siding EBITDA margin by 5 percentage points to 25%. On Slide 13, very high market demand for OSB pushed prices to record levels adding $246 million of revenue and EBITDA in the quarter which rather overshadows both the continued excellence of our cost control and the growth of Structural Solutions, which rose to 49% of total OSB volume. We are, therefore, raising our long-term target of Structural Solutions volume as a percentage of total OSB volume by 5 percentage points to 55%. The use of phenolic resins in OSB lowers line speeds which we estimate lost us $8 million of potential revenue and $3 million of potential EBITDA in the fourth quarter. The Houlton conversion will cost about the same as the Dawson conversion in 2018, that is about $130 million. Roughly $80 million to $85 million of that $130 million will be spent in 2021, with the remainder in 2022. We have other strategic growth projects totaling $30 million to $35 million that will enable us to accelerate our rollout of new products and we have our typical base level of about $100 million in sustaining maintenance. And as Brad mentioned, the capital required for Peace Valley restart should be around $10 million at most. As a result, we expect capital expenditures for the year to be in the range $220 million to $230 million. We will continue to return to shareholders, which is 50% of cash from operations in excess of capital expenditures required to execute our strategy once that cash has been generated. So, given that we ended the year with $535 million in cash with a $300 million share buyback authorization from our Board, we will be reentering the market to continue buying back shares in a matter of days. Halfway through this first quarter of 2021, OSB prices are at least 15% higher than the fourth quarter of 2020 on similar volumes. SmartSide revenue is trending seasonally higher than the fourth quarter, on pace for at least 35% growth compared to the first quarter of 2020. Should these trends continue and absent COVID outbreaks or sudden reversals in logistics, raw material availability or OSB prices, we expect EBITDA for the first quarter of 2021 to be at least $380 million.

Net sales increased by 60% to $860 million, primarily due to 30% growth of SmartSide and $246 million of higher OSB prices. We further lowered our year-end share count to 106 million shares after spending $171 million in the quarter to buy back a little over 5 million shares, and with taxes as the only meaningful adjustment to net income, adjusted earnings per share was $2.01 compared to U.S. GAAP earnings per share of $2.34. We grew SmartSide revenue by 15% and $481 million of revenue and EBITDA from higher OSB prices and generated $659 million in operating cash flow. We have other strategic growth projects totaling $30 million to $35 million that will enable us to accelerate our rollout of new products and we have our typical base level of about $100 million in sustaining maintenance. Halfway through this first quarter of 2021, OSB prices are at least 15% higher than the fourth quarter of 2020 on similar volumes. SmartSide revenue is trending seasonally higher than the fourth quarter, on pace for at least 35% growth compared to the first quarter of 2020. Should these trends continue and absent COVID outbreaks or sudden reversals in logistics, raw material availability or OSB prices, we expect EBITDA for the first quarter of 2021 to be at least $380 million.

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Across our generation fleet, we're targeting a 60% reduction by 2025 and then 80% reduction by 2030, both from a 2005 baseline. So today, we're announcing that our use of coal will continue to decline to a level that we expect will be immaterial by the end of 2030. By the end of 2030, we expect our use of coal will account for less than 5% of the power we supply to customers. We believe we'll be in a position to eliminate coal as an energy source by the year 2035. These Power the Future units rank as some of the most efficient in the country, among the top 5% of all coal-fired plants in heat rate performance over the past decade and they're strategically -- as we've discussed, they are strategically located to support reliability on the Midwestern transmission grid. So subject to the receipt of an environmental permit, we plan to make operating refinements over the next two years that will allow a fuel blend of up to 30% on natural gas. For the period 2022 through 2026, we expect to invest $17.7 billion. This ESG Progress Plan is the largest capital plan in our history, an increase of $1.6 billion or nearly 10% above our previous five-year plan. We expect this plan to support compound earnings growth of 6% to 7% a year over the next five years without any need to issue new equity. We'll be increasing our investment in renewables for our regulated utilities from 1,800 megawatts of capacity in our previous plan to nearly 2,400 megawatts in this brand-new plan. As a reminder, we're targeting net zero methane emissions by 2030. At the end of September, our utilities were serving approximately 8,000 more electric customers and 15,000 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 2.4% from the third quarter of 2020 and on a weather normal basis were up 2.5%. For example, small commercial and industrial electric sales were up 3.5% from last year's third quarter and on a weather normal basis, they were up 4.2%. Meanwhile, large commercial and industrial sales, excluding the iron ore mine, were up 3.8% from the third quarter of 2020 and on a weather normal basis were up 3.5%. Natural gas deliveries in Wisconsin were up 1%. And on a weather normal basis natural gas deliveries in Wisconsin grew by 2.5%. Turning now to our Infrastructure segment, our new capital plan calls for the investment of $1.9 billion between 2022 and 2026. Considering the three projects that are currently under development, we expect to invest an additional $1.1 billion at that timeframe. Announced through an operation in our Infrastructure segment, this represents approximately $2.3 billion of investments. You'll recall that we own 100 megawatts of this project in Southwest Wisconsin. They are projected to save our We Energies customers approximately $200 million over time. The order authorizes a rate increase of 4.5%, including an ROE of 9.67% and an equity ratio of 51.58%. The settlement authorizes a rate increase of 6.35%, including an ROE of 9.85% and an equity ratio of 51.5%. Our 2021 third quarter earnings of $0.92 per share increased $0.08 per share compared to the third quarter of 2020. Starting with our utility operations, we grew our earnings by $0.05 compared to the third quarter of 2020. First, continued economic recovery from the pandemic and stronger weather normalized sales drove a $0.03 increase in earnings. Also, rate relief and additional capital investment added $0.04 compared to the third quarter of 2020 and lower day-to-day O&M contributed $0.04. These favorable factors were partially offset by $0.04 of higher depreciation and amortization expense and $0.02 of increased fuel costs related to higher natural gas prices. It's worth noting that we estimate weather was $0.05 favorable compared to normal in the third quarters of both 2021 and 2020. Overall, we added $0.05 quarter-over-quarter from utility operations. Moving on to our investment in American Transmission Company, earnings increased $0.01 compared to the third quarter of 2020 driven by continued capital investment. Earnings at our Energy Infrastructure segment improved $0.01 in the third quarter of 2021 compared to the third quarter of 2020. Finally, we saw a $0.01 improvement in the Corporate and Other segment. In summary, we improved on our third quarter 2020 performance by $0.08 a share. 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%. Looking now at the cash flow statement on Page 6 of the earnings package. Net cash provided by operating activities increased $57 million. Total capital expenditures and asset acquisitions were $1.7 billion for the first nine months of 2021, a $129 million increase as compared with the first nine months of 2020. Looking forward, as Gale outlined earlier, we're excited about our plans to invest $17.7 billion over the next five years in key infrastructure. This ESG Progress Plan supports 7% annual growth in our asset base. Pages 18 and 19 of the earnings packet provide more details of the breakdown of the plan, which I will highlight here. As we continue to make our energy transition, nearly 70% of our capital plan is dedicated to sustainability, including $5.4 billion in renewable investment and $6.8 billion in grid and fleet reliability. Additionally, we dedicated $2.8 billion to support our strong customer growth. We also plan to invest $2.7 billion in technology and modernization of our infrastructure to further generate long-term operating efficiency. We're raising our earnings guidance again for 2021 to a range of $4.05 to $4.07 per share with an expectation of reaching the top end of the range. If you recall, our original guidance was $3.99 to $4.03 per share. Again, in light of our strong performance, our guidance range now stands at $4.05 to $4.07 a share. We're also tightening our projection of long-term earnings growth to a range of 6% to 7% a year. We continue to target a payout ratio of 65% to 70% of earnings.

Our 2021 third quarter earnings of $0.92 per share increased $0.08 per share compared to the third quarter of 2020. We're raising our earnings guidance again for 2021 to a range of $4.05 to $4.07 per share with an expectation of reaching the top end of the range. Again, in light of our strong performance, our guidance range now stands at $4.05 to $4.07 a share.

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Total revenues for the fourth quarter of fiscal 2021 increased 20% to $153.6 million, compared to $128.4 million in the same quarter last year. Net earnings for the quarter were $5.8 million or $0.53 per diluted share, compared to net earnings of $14.7 million or $1.35 per diluted share in the prior year. Net earnings for the quarter were reduced by an after-tax LIFO impact of approximately $4.5 million or $0.41 per diluted share. Total revenues for the full fiscal year 2021 increased 20% to $567.6 million compared to $474.7 million in the prior year. Net earnings for fiscal 2021 were $42.6 million or $3.88 per share compared to net earnings of $38.6 million or $3.56 per diluted share in the prior year. Irrigation segment revenues for the fourth quarter increased 63% to $125.3 million, compared to $77 million in the same quarter last year. North America irrigation revenues of $53.5 million increased 30% compared to last year's fourth quarter. In the international irrigation markets, revenues of $71.7 million increased 100% compared to last year's fourth quarter. The increase in international irrigation revenues resulted primarily from higher unit sales volumes along with higher selling prices and a favorable foreign currency translation impact of $2.8 million. Total irrigation segment operating income for the fourth quarter was $10.6 million, an increase of 78% compared to the prior year fourth quarter. And operating margin was 8.4% of sales compared to 7.8% of sales in the prior year fourth quarter. We continue to face some margin headwind as the realization of pricing actions lags the impact of cost increases. Fourth quarter operating results were also reduced by approximately $5 million resulting from the impact of the LIFO method of accounting for inventory, under which higher raw material costs are recognized in cost of goods sold rather than in ending inventory values. For the full fiscal year, total irrigation segment revenues increased 35% to $471.4 million compared to $349.3 million in the prior year. North America irrigation revenues of $273.9 million increased 22% compared to the prior year and international irrigation revenues of $197.5 million increased 59% compared to the prior year. Irrigation segment operating income for the full fiscal year was $63.2 million, an increase of 53% compared to the prior year and operating margin was 13.4% of sales, compared to 11.8% of sales in the prior fiscal year. Infrastructure segment revenues for the fourth quarter decreased 45% to $28.4 million compared to $51.4 million in the same quarter last year. Infrastructure segment operating income for the fourth quarter was $5.8 million compared to $19.9 million in the same quarter last year. And Infrastructure operating margin for the quarter was 20.5% of sales, compared to 38.8% of sales in the prior year. Current year results reflect lower revenues and the less favorable margin mix of revenues compared to the prior year fourth quarter and were also reduced by approximately $1 million resulting from the impact of LIFO. For the full fiscal year, infrastructure segment revenues decreased 23% to $96.3 million compared to $125.3 million in the prior year. Infrastructure operating income for the full fiscal year was $20.2 million, compared to $42.7 million in the prior year. And operating margin for the year was 21% of sales compared to 34.1% of sales in the prior year. Our total available liquidity at the end of the fiscal year was $196.7 million with $146.7 million in cash, cash equivalents and marketable securities and $50 million available under our revolving credit facility. Our total debt was $115.7 million almost all of which matures in 2030. At the end of the fiscal year we were well within our financial covenants of our borrowing facilities, including a gross funded debt-to-EBITDA leverage ratio of 1.4 compared to a covenant limit of 3.0.

Total revenues for the fourth quarter of fiscal 2021 increased 20% to $153.6 million, compared to $128.4 million in the same quarter last year. Net earnings for the quarter were $5.8 million or $0.53 per diluted share, compared to net earnings of $14.7 million or $1.35 per diluted share in the prior year. We continue to face some margin headwind as the realization of pricing actions lags the impact of cost increases.

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The company closed the second quarter with record sales of $2.654 billion and GAAP and adjusted diluted earnings per share of $0.59 and $0.61, respectively. Sales were up 34% in U.S. dollars, 30% in local currencies and 22% organically compared to the second quarter of 2020. Sequentially, sales were up 12% in U.S. dollars and in local currencies and 7% organically. Orders for the quarter were a record $3.120 billion, which was up 58% compared to the second quarter of 2020 and up 14% sequentially, resulting in a very strong book-to-bill ratio of 1.18:1. The interconnect segment, which comprised 96% of our sales, was up 34% in U.S. dollars and 30% in local currencies compared to the second quarter of last year. Our cable segment, which comprised 4% of our sales, was up 27% in U.S. dollars and 24% in local currencies compared to the second quarter of last year. GAAP and adjusted operating income were $476 million and $532 million, respectively, in the second quarter of 2021. GAAP operating income includes $55 million of transactions, severance, restructuring and certain other noncash costs related to the MTS acquisition. And the company also incurred $34 million related to the extinguishment of outstanding MTS senior notes that in accordance with GAAP was recorded as an increase to goodwill in the second quarter and therefore had no impact on the second quarter earnings. Excluding these acquisition-related costs, adjusted operating margin was 20%, which increased by a strong 200 basis points compared to the second quarter of last year and increased by 40 basis points sequentially. From a segment standpoint, in the interconnect segment, margins were 22% in the second quarter of 2021, which increased from 20% in the second quarter of 2020 and increased 50 basis points sequentially. In the cable segment, margins were 6.1%, which decreased from 9.4% in the second quarter of 2020 and 8.8% in the first quarter. The company's GAAP effective tax rate for the second quarter was 17.5%, which compared to 20.7% in the second quarter of 2020. On an adjusted basis, this effective tax rate was 24.5% in the second quarter of both 2021 and 2020. GAAP diluted earnings per share was $0.59, an increase of 40% compared to $0.42 in the prior year period. And adjusted diluted earnings per share was a record $0.61, an increase of 53% compared to $0.40 in the second quarter of 2020. Operating cash flow was $411 million in the second quarter or 109% of adjusted net income. And net of capital spending, our free cash flow was $307 million or 81% of adjusted net income. From a working capital standpoint, inventory days, days sales outstanding and payable days were 85, 71 and 60 days, respectively, all excluding the impact of acquisitions in the quarter and within our normal range. During the quarter, the company repurchased 2.5 million shares of common stock for approximately $167 million at an average price of approximately $67. At the end of the quarter, total debt was $5.2 billion and net debt was $4 billion. Total liquidity at the end of the quarter was $2.3 billion, which included cash and short-term investments on hand of $1.2 billion plus availability under our existing credit facilities. Second quarter 2021 GAAP EBITDA was $597 million, and our net leverage ratio was 1.6 times. On a pro forma basis, after giving effect to the sale of MTS test and simulation business, net leverage at June 30, 2021 would have been 1.3 times. Craig already mentioned, our sales grew a very strong 34% in U.S. dollars and 30% in local currencies, reaching a new record of $2.654 billion. On an organic basis, our sales increased by 22%, with growth driven in particular by the automotive, military, industrial and broadband markets as well as contributions from the company's acquisition program. We're very pleased to have booked record orders in the quarter of $3.120 billion and that represented a very strong book-to-bill of 1.18:1. Despite facing operational challenges in certain geographies related to the ongoing pandemic as well as continued increases in costs related to commodities and supply chain pressures, we were very pleased to deliver very strong adjusted operating margins of 20% in the quarter. This was a 200 basis point increase from last year's levels and a 40 basis point improvement sequentially. Adjusted diluted earnings per share grew a very significant 53% from prior year to another new record of $0.61. And finally, the company generated operating and free cash flow of $411 million and $307 million, respectively, in the second quarter. Unlimited is based in Oconto, Wisconsin, but also with operations in Mexico and has annual sales of approximately $50 million. The military market represented 11% of our sales in the quarter. And as expected, sales grew a strong 45% from the COVID impacted prior year second quarter and were up 30% organically. On a sequential basis, sales increased by 12%, also very strong. The commercial air market represented 2% of our sales in the quarter. Sales grew by 7% versus prior year, really with the benefit of the contributions of our recent acquisitions. On an organic basis, sales were down by about 14% as the commercial aircraft market continued to experience declines in demand for new aircraft production. Sequentially, however, our sales did increase by better than expected 19%. The industrial market represented 27% of our sales in the quarter, and our performance in the second quarter in industrial was really much stronger than expected with sales increasing by 54% in U.S. dollars and 28% organically. On a sequential basis, sales increased by a very strong 26% from the first quarter really with the benefit of acquisitions as well as strong organic performance. The automotive market represented 20% of our sales in the quarter. And I can just say that sales were higher than our expectations, growing a very strong 134% in U.S. dollars and 117% organically as our team was able to execute strongly in the face of a robust and broad recovery in the automotive market. That market represented 10% of our sales in the quarter. Our sales to customers in the mobile devices market declined from prior year by 4% in U.S. dollars and 6% organically as declines in handsets and laptops more-than-offset growth in wearables. Sequentially, our sales fell by 6% from the first quarter, which was modestly better than our expectations. Looking to the third quarter, we now expect an approximately 25% increase in sales from these second quarter levels as we benefit from the seasonally typical higher demand in the mobile device market as customers launch a range of new products. The mobile networks market represented 5% of our sales in the quarter. Sales were flat to prior year and down 4% organically as sales to both OEMs and wireless service providers moderated. On a sequential basis, however, our sales increased by 5% compared to the first quarter, which was in line with our expectations coming into the second quarter. The information technology and data communications market increased by 21% in the second quarter. Sales in the second quarter rose by 5% in U.S. dollars and 3% organically from the very significant levels in last year's second quarter. Our strength this quarter was driven, in particular, by robust sales to web service providers, which was partially offset by some weakness in sales to networking equipment OEMs. Sequentially, our sales grew a very strong 20% from the first quarter, which significantly outperformed our original expectations. This market represented 4% of our sales in the quarter, and sales increased by 12% from prior year and were flat organically as we benefited from our recent acquisition of Cablecon. On a sequential basis, sales increased by 7% from the first quarter, which was a bit lower than we had anticipated coming into the quarter. And I would just note that given the current dynamic market environment, and of course, assuming no new material disruptions from the COVID-19 pandemic as well as constant exchange rates, in the third quarter, we expect sales in the range of $2.640 billion to $2.700 billion, and adjusted diluted earnings per share in the range of $0.60 to $0.62. This would represent sales growth of 14% to 16% and adjusted diluted earnings per share growth of 9% to 13% compared to the third quarter of last year.

The company closed the second quarter with record sales of $2.654 billion and GAAP and adjusted diluted earnings per share of $0.59 and $0.61, respectively. GAAP diluted earnings per share was $0.59, an increase of 40% compared to $0.42 in the prior year period. And adjusted diluted earnings per share was a record $0.61, an increase of 53% compared to $0.40 in the second quarter of 2020. Adjusted diluted earnings per share grew a very significant 53% from prior year to another new record of $0.61. And I would just note that given the current dynamic market environment, and of course, assuming no new material disruptions from the COVID-19 pandemic as well as constant exchange rates, in the third quarter, we expect sales in the range of $2.640 billion to $2.700 billion, and adjusted diluted earnings per share in the range of $0.60 to $0.62. This would represent sales growth of 14% to 16% and adjusted diluted earnings per share growth of 9% to 13% compared to the third quarter of last year.

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Broadly speaking, and not surprisingly, our Q3 sales across most markets were negatively impacted by the ongoing pandemic and resulting economic downturn. Aggregate year-over-year sales were down 60% in the third quarter, driven by factors we're all familiar with: quarantines, travel restrictions and low 737 MAX production. Excluding titanium armor, ATI's diversified defense sales were up more than 20% year-over-year, led by naval nuclear and military aerospace growth. From a performance standpoint, the adjusted earnings per share loss of $0.38 per share in Q3 is significantly better than our previous guidance of a loss of between $0.62 and $0.72 per share. Consider this, our third quarter revenue dropped by more than 40% versus prior year, including a 60% decline in our high-value commercial aerospace business. Despite the 40% drop in revenue, we posted a 25% year-over-year decremental margin in Q3. That's a meaningful improvement from the 28% decremental margins captured in Q2, clear improvement resulting from quick action. We ended the quarter with approximately $950 million of total liquidity, including $572 million of cash in the bank. As a result, we expect a fourth quarter adjusted earnings per share loss in the range of $0.36 to $0.44 per share, similar to our third quarter's adjusted EPS. We reduced managed working capital by $115 million in the third quarter in the midst of the steep economic decline. Our updated capex forecast range is $125 million to $135 million, about 60% of the original 2020 projections. We are raising our full year 2020 free cash flow expectations to a range of $135 million to $150 million before pension contribution. At the end of the third quarter, managed working capital was approximately 50% of revenue. This compares to 30% at the end of 2019.

Broadly speaking, and not surprisingly, our Q3 sales across most markets were negatively impacted by the ongoing pandemic and resulting economic downturn. From a performance standpoint, the adjusted earnings per share loss of $0.38 per share in Q3 is significantly better than our previous guidance of a loss of between $0.62 and $0.72 per share.

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The group had an impressive quarter with adjusted local currency revenue growth of 13% and profit growth of 24%. Within the flavors and extracts group, the natural ingredients business had another strong quarter with local currency sales growth of 14.5% as a result of strong demand for seasoning, snacks and packaged foods. Flavors extracts and flavor ingredients also had a nice quarter, up 12% in local currency. Overall, the flavors and extracts group's operating profit margin was up 110 basis points in the quarter. The color group's adjusted operating profit increased 3% in the quarter. Food and pharmaceutical colors had a great quarter, generating profit growth of more than 20% and about 15% for the first nine months of 2020. Overall, the color group's operating profit margin increased 110 basis points in this quarter. The group had another strong quarter of profit growth, up approximately 15% in the quarter and 17% for the first nine months of 2020. The group's operating profit margin increased 200 basis points in the quarter. The costs of this plan are estimated to be approximately $5 million to $7 million. Our third quarter GAAP diluted earnings per share was $0.78. Included in these results are $1.4 million or approximately $0.03 per share of costs related to the divestitures and other related costs and the cost of the operational improvement plan. In addition, our GAAP earnings per share this quarter include approximately $0.04 of earnings related to the results of the operations targeted for divestiture, which represents approximately $23.6 million of revenue in the quarter. Last year's third quarter GAAP results included approximately $0.02 of earnings per share from the operations to be divested and approximately $34.1 million of revenue. Excluding these items, consolidated adjusted revenue was $300 million, an increase of approximately 6.1% in local currency compared to the third quarter of 2019. This revenue growth was primarily a result of the flavors and extracts group, which was up approximately 13% in local currency. Consolidated adjusted operating income increased 10.1% in local currency to $41.5 million in the third quarter of 2020. This growth was led by the flavors and extracts group, which increased operating income by 24.1% in local currency. The Asia Pacific group also had a nice growth in operating income in the quarter, up 15.5% in local currency. And operating income in the food and pharmaceutical business in the color group was up over 20% in local currency. Our adjusted diluted earnings per share was $0.77 in this year's third quarter compared to $0.74 in last year's third quarter. We have reduced debt by approximately $60 million since the beginning of the year. Our debt-to-EBITDA is 2.6, down from 2.9 at the start of the year. Cash flow from operations was $143 million for the first nine months of 2020, an increase of 12% compared to prior year. Capital expenditures were $34 million in the first nine months of 2020 compared to $26.1 million in the first nine months of 2019. Our free cash flow increased 7% to $109 million for the first nine months of this year. Consistent with what we communicated during our last call, we expect our adjusted consolidated operating income and earnings may be flat to lower in 2020 because of the level of non-cash performance-based equity expense in 2020. Based on current trends, we are reconfirming our previously issued full-year GAAP earnings per share guidance of $2.10 per share to $2.35 per share. The full-year guidance also now includes approximately $0.05 of currency headwinds based on current exchange rates. We are also reconfirming our previously issued full-year adjusted earnings per share guidance of $2.60 to $2.80, which excludes divestiture-related costs, operational improvement plan costs, the impact of the divested or to-be-divested businesses and foreign currency impacts. We expect our capital expenditures to be in a range of $50 million to $60 million annually.

Our third quarter GAAP diluted earnings per share was $0.78. Consistent with what we communicated during our last call, we expect our adjusted consolidated operating income and earnings may be flat to lower in 2020 because of the level of non-cash performance-based equity expense in 2020. Based on current trends, we are reconfirming our previously issued full-year GAAP earnings per share guidance of $2.10 per share to $2.35 per share. We are also reconfirming our previously issued full-year adjusted earnings per share guidance of $2.60 to $2.80, which excludes divestiture-related costs, operational improvement plan costs, the impact of the divested or to-be-divested businesses and foreign currency impacts.

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Second quarter sales were $1.27 billion, EBIT was $172 million, and earnings per share were $0.82, all significantly higher than the second quarter of 2020. When comparing to the pre-pandemic results of second quarter 2019, trade sales grew 5%, adjusted EBITDA was up 9%, and adjusted EBITDA margin improved 60 basis points and adjusted earnings per share increased 12%. The company, Kayfoam, is located near Dublin and has two manufacturing facilities with combined annual sales of approximately $80 million. Sales in our Bedding Products segment were up 7% versus the second quarter of 2019, primarily from raw material related selling price increases from inflation in steel, chemicals and nonwoven fabrics. Sales in our Specialized Products segment were down 9% for the second quarter of 2019 due to lower volume across the segment. Sales in our Furniture, Flooring & Textile Products segment were up 11% versus the second quarter of 2019, driven by demand strength in home furniture and geo components. Overall, the fixed cost actions we took last year reduced our second quarter cost by approximately $20 million versus the second quarter of 2019. In the second quarter, cash from operations was $41 million. We now anticipate cash flow from operations to approximate $450 million in 2021. At the end of the quarter, adjusted working capital as a percentage of annualized sales was 12.8%. During the first half of the year, we brought back $187 million of offshore cash and currently expect to return at least $200 million of cash for the full year. In May, we increased the quarterly dividend by $0.02 to $0.42 per share. At an annual indicated dividend of $1.68, the yield is 3.5% based upon Friday's closing price of $48.03, one of the higher yields among the S&P 500 dividend aristocrats. We ended the quarter with net debt to trailing 12-month EBITDA of 2.32 times and $1.3 billion of total liquidity. For the full year 2021, we expect capital expenditures of approximately $140 million. Dividends should approximate $215 million and acquisition spending of approximately $150 million. 2021 sales are now expected to be $4.9 billion to $5.1 billion or up 14% to 19% over 2020, resulting from mid- to high single-digit volume growth, raw material related price increases, currency benefit and approximately 1% growth from acquisitions, net of divestitures. The increased versus prior guidance of $4.8 billion to $5 billion reflects a combination of higher raw material related price increases and acquisition sales. 2021 earnings per share are now expected to be in the range of $2.86 to $3.06, including $0.16 per share from the real estate gain recognized in the second quarter. Full year adjusted earnings per share is now expected to be $2.70 to $2.90, with increase versus prior guidance of $2.55 to $2.75, primarily due to higher metal margin. This guidance also assumes fixed cost savings as a result of actions taken in 2020 to be approximately $70 million. Based upon this guidance framework, our 2021 full year adjusted EBIT margin range should be 11.4% to 11.6%. Earnings per share guidance assumes a full year effective tax rate of 23%, depreciation and amortization to approximate $195 million, net interest expense of approximately $75 million, and fully diluted shares of 137 million.

Second quarter sales were $1.27 billion, EBIT was $172 million, and earnings per share were $0.82, all significantly higher than the second quarter of 2020. 2021 sales are now expected to be $4.9 billion to $5.1 billion or up 14% to 19% over 2020, resulting from mid- to high single-digit volume growth, raw material related price increases, currency benefit and approximately 1% growth from acquisitions, net of divestitures. 2021 earnings per share are now expected to be in the range of $2.86 to $3.06, including $0.16 per share from the real estate gain recognized in the second quarter. Full year adjusted earnings per share is now expected to be $2.70 to $2.90, with increase versus prior guidance of $2.55 to $2.75, primarily due to higher metal margin.

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In the past 18 months, we have significantly repositioned our organization by focusing on the customer, investing in the business and delivering on productivity and operational improvements. First, we achieved an increase of more than 250% in adjusted net income per share compared to the third quarter in 2019. Two, we expanded adjusted operating margin by 240 basis points versus prior year. Three, we generated operating cash flow $118 million as a result of increased earnings and working capital improvements. Fifth, we reduced total debt by $70 million in the quarter. And six, we launched a $200 million follow-on equity offering, which has since closed. Specifically related to the global solutions segment, we grew revenue $317 million sequentially from Q2 to Q3. And finally, we reached a milestone in the COVID fight, with nearly 11 billion units of PPE delivered, of which approximately 4 billion units were produced with materials manufactured in our American factories or Owens & Minor owned facilities, all of that being done since the beginning of this year. We paid down debt by $231 million year-to-date and by $402 million in the last six quarters. In addition to that, we have another $130 million in cash on hand that is specifically earmarked to pay down additional debts. And finally, today we are pleased to raise our 2020 full year adjusted earnings per share guidance to a range of $1.90 to $2. And we are reconfirming double digit adjusted earnings per share growth in 2021. Earlier today, we announced our revised full year adjusted net income guidance, which has been increased to $1.90 to $2 per share with a continued expectation of double digit growth in 2021. Beginning with the top line, net revenue in the third quarter was $2.2 billion, compared to $2.3 billion for the prior year. Gross Margin in the third quarter was 15.7%, an improvement of 350 basis points over prior year, as a greater portion of sales came from the higher margin global products segment and is evidence of the increasing level of operating efficiencies, productivity and fixed cost leverage we've achieved. Distribution, selling and administrative expense of $263 million in the quarter increased $14 million compared to the third quarter of 2019, primarily as a result of continued investments in the business, partially offset by ongoing productivity gains. Interest expense of $21 million in the third quarter was $3 million lower than the prior year as a result of lower debt levels due to improved operating cash flows and working capital. The combined impact from the strong operational performance and execution resulted in income from continuing operations for the quarter of $46 million, an improvement of $43 million compared to prior year. GAAP income from continuing operations per share for the quarter was $0.76, an increase of $0.70 versus the same period last year. The resulting adjusted earnings per share for the quarter was $0.81, which represents a year-over-year increase of over 250% and a fourfold improvement sequentially versus Q2. The foreign currency impact in the quarter was $0.06 favorable. Revenue for the global solutions segment was $1.9 billion, compared to $2 billion for the same period in the prior year. Relative to the second quarter, global solutions revenue grew by $317 million attributable to the increase in elective procedures. To help put this in perspective, revenue improved from about 80% of pre-COVID levels in Q2 to the mid 90s in Q3. Global solutions posted operating income of $11 million for the third quarter compared to income of $25 million last year, driven by lower volume. Sequentially, global solutions operating income increased by $21 million or 7% of incremental revenue as volumes improved against our largely stable cost base. Now turning to the global products segment, revenue was $474 million, compared to $360 million in the third quarter of last year, driven by growth in PPE sales net of the impact of lower elective procedures. Sequentially, global products revenue increased by $103 million. Global products reported operating income of $90 million, which increased by $73 million over last year. In the third quarter, we generated operating cash flow of $118 million and $268 million year-to-date on a consolidated basis as a result of improved profitability and stringent working capital management. Total debt was $1.3 billion at September 30, representing a sequential reduction of $70 million since the second quarter, and $231 million decline since year-end. Recently, we executed the next step in our financial strategy to further strengthen our balance sheet with a successful equity raise netting $190 million, closing on October 6. This offering resulted in the issuance of 9.7 million additional shares, which is expected to negatively impact earnings per share by $0.05 for 2020. We plan to utilize $134 million held as restricted cash at the end of September, plus other available funds to retire these notes. As I mentioned earlier in my remarks, we revised our full year adjusted net income guidance upwards to a range of $1.90 to $2 per share, inclusive of the dilution from our recent equity raise. Q3 revenue associated with elective procedures increased to the mid 90% of pre-COVID levels.

And we are reconfirming double digit adjusted earnings per share growth in 2021. As I mentioned earlier in my remarks, we revised our full year adjusted net income guidance upwards to a range of $1.90 to $2 per share, inclusive of the dilution from our recent equity raise.

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MPC EBT is up 29%. Operating asset NOI is higher by 1% even with lingering impacts from the pandemic. And this was all accomplished while reducing our G&A cost by 30%. Condo sales in Ward Village accelerated despite a shrinking supply of available units under construction and the Seaport saw steady improvements from the return of the concert series at Pier 17 and the growing popularity of our unique restaurants. We expect these results to grow stronger especially with the recent addition of Douglas Ranch our latest MPC spanning 37000 acres in Phoenix West Valley. In October we announced our $600 million all-cash acquisition of this fully entitled shovel-ready MPC which further adds to our depth of opportunities. By strategically redeploying the net proceeds from our noncore asset dispositions we now have the ability to transform this blank canvas into a leading community focused on sustainability and technology a community that is entitled for 100000 homes 300000 residents and 55 million square feet of commercial development. As such we are pleased to announce our recent Board-approved share buyback program amounting to $250 million. During the third quarter our MPCs recorded earnings before taxes of $54.1 million a 48% increase compared to last year largely driven by the robust superpad sales activity in Summerlin as well as the strong performance of our Summit joint venture. So far in 2021 there have been 2163 new homes sold in our MPCs a 6% increase over last year indicating further demand lies ahead. As such we are raising our full year 2021 MPC EBT guidance by $60 million at the midpoint to a range of $275 million to $285 million primarily due to stronger-than-expected superpad sales in Summerlin. Speaking of Summerlin this MPC drove a substantial portion of the positive results for the quarter selling 47 acres mostly made up of superpads. This MPC generated $45.6 million in EBT a staggering 130% increase compared to the prior year period. Additionally year-to-date new home sales have eclipsed over 1200 units and are 20% higher over the same period in 2020 which if you recall was one of the strongest years in Summerlin's history. The total earnings from our share of equity during the quarter totaled $8.3 million driving year-to-date earnings to $54.6 million versus only $4.4 million during the first nine months of 2020. Lastly in the Woodlands Hills despite lower quarterly land sales due to the similar impacts experienced in Bridgeland the residential price per acre grew 18% over the prior year period to $353000 while new home sales were up 15% which points to future growth ahead as we accelerate activity across this MPC. We saw heightened activity throughout the quarter as events and concerts at Pier 17 helped draw in spectators. During the quarter NOI improved 43% compared to the same period in 2020 indicating the return to normalcy is near. In July we launched our 11-week summer concert series on the Pier 17 rooftop. Of the 30 concerts hosted 20 were fully sold out. The turnout for these contracts proved to be very strong with approximately 74000 guests in attendance representing 90% of our available ticket inventory. In addition to concerts we hosted several other major events including the SPs in July and the world tour for the Fujis who debuted at Pier 17 for their first show together in 15 years. As a result our restaurant saw their average monthly sales increased 65% versus last quarter. For the third quarter we reported $60.6 million of NOI. When you layer in the activity from our three hotels that were sold in September this segment generated $62.9 million. These assets generated $16.1 million of NOI during the third quarter the highest level since the first quarter of 2019. For the third quarter we collected 83% of our retail rents with Summerlin leading the charge for the highest collections in our portfolio. In fact Ward was the largest contributor to the sequential increase in retail NOI partly as a result of a onetime payment of deferred rent of approximately $1.4 million. At the Las Vegas Ballpark we were able to host the remainder of the aviator season at 100% capacity. This resulted in $5.4 million of NOI a 74% increase over the last quarter where the beginning of the season was limited to 50% capacity to comply with COVID-19 protocols. This is a stark comparison to the same period in 2020 where the ballpark lost nearly $1 million as the season was canceled entirely due to the pandemic. Our multifamily assets produced $9.2 million of NOI during the third quarter a 24% sequential increase almost exclusively attributable to strong leasing momentum at our most recent developments. And during the third quarter these new developments made up 2/3 of the increase in sequential NOI growth. For the third quarter we generated $27.8 million in NOI a 6% increase sequentially and a 17% increase compared to the same period last year. The bulk of this increase was driven by the roll-off of free rent at select assets including 6100 Merriweather our latest office building in Downtown Columbia. With that we are pleased to announce the launch of two medical facilities spanning 106000 square feet throughout Downtown Columbia and the Woodlands. Encompassing approximately 86000 square feet we have already secured an anchor tenant for roughly 20% of the entire space. In The Woodlands we will launch development on a 20000 square foot build-to-suit medical office building for Memorial Hermann. These 263 homes will span a combined 328000 square feet and offer a unique hybrid between single-family homes for sale and multifamily for rent adding yet another new product to our operating asset portfolio. In total these three projects represent over 430000 square feet and $114 million of development as we continue to put our capital to work and enhance our stream of recurring income. The launch of the Tin Building has been highly anticipated and our team has been working in close partnership with the Jean Georges team to prepare for the grand opening of this 53000 square foot food hall in the first half of 2022. Lastly we continue to make great strides through New York City's ULURP process to obtain the necessary approvals for the development of a 26-story mixed-use building at 250 Water Street. Across our three recent towers 'A'ali'i Koula and Victoria Place we were 90% presold as of the end of the quarter with Koula and Victoria Place still under construction. And as of the end of October we have already contracted 64% of the total units. The sales activity across these four towers just in the third quarter translates to 316 contracted units secured by hard deposits during a period of time when travel to the island of Oahu was discouraged surrounding Delta variant concerns. As of November two we closed on 495 units totaling $332 million in net revenue revenue that will be recognized on our fourth quarter income statement and will contribute meaningly to our bottom line. In summary our MPCs produced $54.1 million of earnings before tax or EBT during the third quarter a 22% decrease compared to the last quarter and a 48% increase compared to the prior year period. Our operating assets recorded a $62.9 million of NOI when including the contribution from the three Woodlands-based hotels which represented a 9% increase compared to the last quarter and a 65% increase compared to the prior year period. At Ward Village we contracted 316 condo units which were made up of 61 units from our three towers under construction and 255 units at the park which launched presales during the quarter. Combined sales at 'A'ali'i Koula and Victoria Place were up 36% compared to the prior quarter and increased 154% compared to the prior year period. Finally at the Seaport we recorded a $3.6 million loss in NOI resulting in a 19% improvement over the last quarter and a 43% improvement compared to the prior year period. We reported net income of $4.1 million or $0.07 per diluted share compared to net income of $139.7 million or $2.51 per diluted share in the prior year period. The decrease in net income from the prior year was attributed to a onetime noncash gain of $267.5 million for the third quarter of 2020 which was related to the deconsolidation of our 110 North Wacker office tower in Chicago. Our previous guidance range for 2021 was $210 million to $230 million. We are now raising our guidance by $60 million at the midpoint thus revising our range to $275 million to $285 million as we are expecting a strong end to the year. Given the recovery we are experiencing in our operating assets we are raising our full year NOI guidance by $5 million to a range of $200 million to $210 million. We are raising this segment's guidance despite the fact that we will not receive any hospitality-related NOI during the fourth quarter as we just sold our Woodlands hotels in September for $252 million. The sale of these assets generated $120 million of net proceeds and brings our total net proceeds from noncore asset sales to $376 million since the announcement of our strategic transformation plan in late 2019. We are also revising our full year condo profit guidance at Ward Village by $7.5 million at the midpoint. Our previous guidance range for 2021 was $100 million to $125 million. With elevated condo sales following the completion of 'A'ali'i in October we are expecting condo profits to range between $115 million to $125 million. Please note that this target excludes the $20 million repair cost incurred at Waiea during the first quarter which we fully expect to be reimbursed for. Lastly we remain on track to meet our previously disclosed G&A guidance of $80 million to $85 million for 2021. We ended the third quarter with $1 billion of cash on hand leaving us plenty of runway to execute on the recent capital initiatives we discussed earlier. A couple of our recent financings include two construction loans for our latest project in Downtown Summerlin a $75 million loan for our 1700 Pavilion office development and a $59.5 million loan for our Tanager Echo multifamily development. In addition we refinanced The Woodlands and Bridgeland credit facility into a new $275 million loan secured by Bridgeland notes receivables and land to support future horizontal development. Lastly subsequent to quarter end we closed on a $250 million loan for 1201 Lake Robbins resulting in net proceeds of $248 million which helps elevate our overall cash position. We announced the launch of three new development projects and we announced the $250 million share buyback.

We reported net income of $4.1 million or $0.07 per diluted share compared to net income of $139.7 million or $2.51 per diluted share in the prior year period.

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Before I turn to our key first quarter operational achievements, I want to note that working with the Greg Hill Foundation, our Sam Adams Restaurant Strong Fund has raised over $7.5 million dollars thus far to support bar and restaurant workers who were experiencing hardships in wake over COVID-19 and it committed to continue to distribute 100% of its proceeds through grants to bars and restaurant workers across the country. The company's depletions increased 48% in the first quarter and we achieved double-digit volume growth for the 12th consecutive quarter. In the first quarter in measured off-premise channels, the Truly brand outgrew the hard seltzer category by nearly 2 times or 50 percentage points, resulting in a share increase of 6.5 percentage points. The Truly brand has now reached a market share of over 28%, accounting for approximately 40% of all growth cases in the hard seltzer category year-to-date, which is two times greater than the next largest growth brand. Truly Iced Tea Hard Seltzer has achieved a 4.3 percentage point market share in measured off-premise channels, well ahead of all other new entrants to the entire beer category. Based on information in-hand, year-to-date depletions reported in the company through the 15 weeks ended April 10, 2021, our estimated depletion is approximately 49% from the comparable weeks in 2020. For the first quarter, we reported net income of $65.6 million or $5.26 per diluted share, an increase of $3.77 per diluted share in the first quarter of last year. In the first quarter of 2020, we recorded pre-tax COVID-19-related reduction in net revenue and increases in costs, that total $10 million or $0.60 per diluted share. For the first quarter of 2021, shipment volume was approximately 2.3 million barrels, a 60.1% increase from the first quarter of 2020. Shipment volume for the quarter was significantly higher than depletions volume and resulted in significantly higher distributor inventory as of March 27, 2021 when compared to March, 28 2020. Our first quarter 2021 gross margin of 45.8% increase in the 44.8% margin realized in the first quarter of last year. First quarter advertising, promotional and selling expenses increased by $43 million in the first quarter of 2020, primarily due to increased brand investment of $21 million, mainly driven by higher media and production costs. Higher salaries and benefits costs and increased freight to distributors of $21.9 million due to a higher volume and rate. General and administrative expenses increased by $4.9 million from the first quarter of 2020, primarily due to increases in salaries and benefits costs. During the first quarter, we recorded an income tax expense of $11 million, which consists of income tax expenses of $19.6 million partially offset by $8.6 million fixed benefit related to stock option exercises in accordance with ASU 2016-09. The effective tax rate for the first quarter, excluding the impact of ASU 2016-09 increased to 25.6% and was 23.6% in the first quarter of 2020. Based on information of which we are currently aware, we are targeting 2021 earnings per diluted share of between $22 and $26, an increase from the previously communicated range of between $20 and $24, excluding the impact of ASU 2016-09, but actual results could vary significantly from our target. We are currently planning increases in shipments and depletions of between 40% and 50%, an increase from the previously communicated range of between 35% and 45%. We're targeting national price increases per barrel of between 1% and 3%, an increase from the previously communicated range of between 1% and 2%. 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 $130 million to $150 million for the full year 2021, an increase from the previously communicated range of between $120 million and $130 million. We estimate our full year 2021 effective tax rate to be approximately 26.5% excluding the impact of a ASU 2016-09. We're not able to provide forward guidance on the impact of ASU 2016-09 [Indecipherable] 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 with those options were granted. We're continuing to evaluate 2021capital expenditures and currently estimate investments of between $250 million and $350 million, a decrease in our previously communicated range of between $300 million and $400 million. We expect that our March 27, 2021 cash balance of $144.7 million together with the future operating cash flows and the $150 million remaining under the line of credit, will be sufficient to fund future cash requirements.

For the first quarter, we reported net income of $65.6 million or $5.26 per diluted share, an increase of $3.77 per diluted share in the first quarter of last year.

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In total, we achieved record first quarter net sales of $505.1 million, a 12.4% increase from Q1 2020. Net sales in our base business, which excludes the Crisco acquisition completed in December, were approximately $447 million, virtually flat versus first quarter 2020 at a modest 0.6% decline. Within that number, US base business net sales were up 2.1% while international base business net sales were down 31.8%. Compared to fiscal 2019 our base business net sales, which for purposes of the two-year comparison also exclude Clabber Girl and Farmwise net sales increased $16.6 million or 4% for the quarter. Our $447 million of base business net sales were supplemented by the $58 million of Crisco net sales, bringing our total net sales up to the $505 million figure. Adjusted EBITDA for the quarter also set a first quarter record at $92.9 million a 15.2% increase, a result of solid base business volume and earnings and a fulsome Crisco benefit in our first few months of ownership. We reported net sales of $505.1 million in the first quarter, an increase of $55.7 million or 12.4% compared to the prior year first quarter and an increase of nearly $95 million or 22.4% compared to the first quarter of 2019. Crisco generated approximately $58.1 million in net sales for the quarter, which is slightly ahead of our internal model. Base business net sales, which excludes the benefit of Crisco, were essentially flat to last year's first quarter, were down 0.6%. Excluding the benefit of Crisco, net sales were up approximately $34.4 million or 8.3% from Q1 2019, approximately $17.7 million of which was due to the May 2019 acquisition of Clabber Girl and the February 2020 Farmwise acquisition and approximately $16.7 million of which was due to base business net sales growth. We generated adjusted EBITDA before COVID-19 expenses of $95.8 million in the first quarter of 2021, an increase of $15 million or 18.5%. During the first quarter of 2021, we incurred approximately $2.9 million in incremental COVID-19 costs at our manufacturing facilities, which primarily included temporary enhanced competition for our manufacturing employees, compensation we continue to pay the manufacturing employees while in quarantine, and expenses related to the precautionary health and safety measures. As discussed in our fourth quarter and full year 2020 call, we expect to see a continued reduction in these costs, which averaged $1.5 million per month during the height of the pandemic. Inclusive of these costs, we reported adjusted EBITDA of $92.9 million which is an increase of $12.2 million or 15.2% compared to last year's first quarter. Adjusted EBITDA before COVID-19 expenses as a percentage of net sales was 19% in the first quarter of 2021. Adjusted EBITDA as a percentage of net sales was 18.4%. Adjusted EBITDA before COVID-19 expenses as a percentage of net sales and adjusted EBITDA as a percentage of net sales were 18% in the first quarter of 2020 as COVID-19 expenses did not fully kick in until the second quarter of 2020. We reported $0.52 in adjusted diluted earnings per share in the first quarter of 2021 an increase of $0.06 per share or 13% compared to the prior year first quarter. Net sales of our spices and seasonings including our legacy brand such as Ac'cent and Dash and the brands we acquired in 2016 such as Tone's and Weber were up by $30 million or 41.2% for the quarter. Net sales of spices and seasonings were up by $17.1 or 20% compared to the first quarter of 2019. Net sales of spices and seasonings reached $397.7 million for the 12 months ended March 2021. Maple Grove Farms generated approximately $20.7 million in net sales during the first quarter of 2021 an increase of $2.3 million or 12.1% compared to Q1 2020, and an increase of $2.8 million or 15.5% compared to Q1 2019. Las Palmas generated $10.7 million in net sales during the first quarter of 2021, an increase of $0.2 million or 1.8% compared to Q1 2020 and an increase of $1.3 million or 14.4% compared to Q1 2019. Ortega generated $39 million in net sales during the first quarter of 2021, an increase of $0.2 million or 0.4% compared to Q1 2020 and an increase of $1.7 million or 4.6% compared to Q1 2019. Green Giant, which was one of the largest beneficiaries of COVID-19 pandemic buying of the past year in our portfolio had approximately $639 million in net sales during fiscal 2020, an increase of $112.2 million or 21.3% compared to the prior year. Primarily as a result of those decisions, Green Giant net sales were just $132.5 million in the quarter, a decrease of $25.9 million or 16.4% compared to the prior year quarter. However demand for Green Giant remained strong and we expect a strong second half of the year and we expect full year net sales of Green Giant products to exceed the brand's fiscal 2019 net sales of approximately $525 million. Cream of Wheat for example generated $18.2 million in net sales during the first quarter of 2021, a decrease of $0.7 million or 4% compared to Q1 2020, but an increase of $0.8 million or 4.3% compared to Q1 2019. Clabber Girl generated $17.4 million in net sales during the first quarter of 2021 a decrease of $1.3 million or 6.8% compared to Q1 2020, but significantly greater than the estimated $15 million or so of net sales generated during the Q1 2019 period under prior ownership. Our gross profit was $117.8 million for the first quarter of 2021 or 23.3% of net sales. Excluding the negative impact of approximately $5.5 million of acquisition divestiture related expenses, the amortization of acquisition related inventory, fair value step up, and non-recurring expenses included in the cost of goods sold, our gross profit would have been $123.3 million or 24.4% of net sales. Gross profit was $104.9 million for the first quarter of 2020 or 23.3% of net sales. Excluding the negative impact of approximately $2.3 million of acquisition divestiture related expenses and non-recurring expenses included in cost of goods sold, our gross profit would have been $107.2 million or 23.9% of sales. Selling, general and administrative expenses for the year were $50.4 million or 10% of net sales. This compares to $40 million or 8.9% for the prior year. The dollar increase in SG&A is primarily composed of an incremental $4 million investment in consumer marketing, $1.9 million in incremental acquisition related costs, and non-recurring expense, which primarily relate to the acquisition and integration of the Crisco brand and $4.1 million in increased warehousing costs. General and administrative expenses increased by $1.3 million. These costs were partially offset by decreased selling expenses of $0.9 million. As I mentioned earlier, we generated $95.8 million dollars in adjusted EBITDA before COVID-19 expenses and after the inclusion of $2.9 million of COVID-19 expenses adjusted EBITDA of $92.9 million. This compares to adjusted EBITDA before COVID-19 expenses of $80.8 million in Q1 2020 and $75.8 million in Q1 2019. We generated $0.52 in adjusted diluted earnings per share in the first quarter of 2021 compared to $0.46 per share in Q1 2020 and $0.44 per share in Q1 2019. Net cash provided by operating activities was $26 million during the first quarter of 2021 compared to $57.6 million during Q1 2020. The majority of the decrease was driven by the timing of an approximately $24 million interest payment for 2025 notes on April 1, which happened to fall into our first quarter for this year and our second quarter last year. The remainder of the decrease was driven by a $12.6 million increase in incentive compensation paid in cash as a result of the Company's very strong performance in fiscal 2020 relative to the prior year. Our consolidated leverage ratio, as defined by our credit agreement, and which is calculated on a pro forma and net debt basis, was 5.23 times and remains within our long-term leverage target of 4.5 to 5.5 times and well below our credit agreement covenant threshold of 7 times. We are reaffirming our 2021 sales guidance that we provided in March as we continue to expect Company record net sales of $2.05 billion and $2.1 billion in fiscal 2021 inclusive of the benefit of a full year of the Crisco acquisition. For the second quarter we expect something similar with our base business net sales to trend much closer to our 2019 net sales than our 2020 net sales, may be low to mid single-digit percentage points higher than what we experienced in 2019. Historically, Crisco generated about 20% of its full year net sales in the April to June period. As a result, we expect to generate adjusted EBITDA as a percentage of net sales of approximately 18% to 18.5%, which is generally consistent with our performance in the recent fiscal years. As I said at the beginning of the call, the quarter played out much as we expected with substantial sales gains in the first 10 weeks and then tough comparisons in the last few. As Bruce described, the largest dollar decline we saw in quarter-to-quarter sales was in Green Giant, down 16.4%. Excluding the Green Giant brand and the remarkable swing in that brand, net sales for the remainder of our base business increased by 8.1% over first quarter 2020. At $58.1 million in net sales it is tracking to our expectations and margins were accretive to our overall results. With the addition of Crisco, we estimate that our baking at home brands will be approximately 20% of our net sales. While there are no complete or precise measures of net sales through this means, we are able to estimate that retail sales of our brands these various e-commerce venues grew by over 60% to $50 million in the first quarter. At this point we estimate that e-commerce retail sales for the full year will continue to grow at that rate and reach $275 million this year. Our household penetration has grown substantially in the past year and is up almost 10 percentage points versus 12 months ago. While this was a $2.9 million negative in the first quarter, we should save much of the $13.3 million we spent on COVID-19 related measures in the last three quarters of 2020. Our net sales increased by 38% in the second quarter of 2020 over 2019, reflecting the height of the pandemic pantry loading.

We reported net sales of $505.1 million in the first quarter, an increase of $55.7 million or 12.4% compared to the prior year first quarter and an increase of nearly $95 million or 22.4% compared to the first quarter of 2019. We reported $0.52 in adjusted diluted earnings per share in the first quarter of 2021 an increase of $0.06 per share or 13% compared to the prior year first quarter. We generated $0.52 in adjusted diluted earnings per share in the first quarter of 2021 compared to $0.46 per share in Q1 2020 and $0.44 per share in Q1 2019. We are reaffirming our 2021 sales guidance that we provided in March as we continue to expect Company record net sales of $2.05 billion and $2.1 billion in fiscal 2021 inclusive of the benefit of a full year of the Crisco acquisition. For the second quarter we expect something similar with our base business net sales to trend much closer to our 2019 net sales than our 2020 net sales, may be low to mid single-digit percentage points higher than what we experienced in 2019.

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Live music roared back over the past quarter, driving all our business stipends to positive AOI for the first time in two years with companywide AOI of $306 million. The 2021 summer concert season rebounded quickly, with 17 million fans attending our shows in the quarter has returned to live, reflected tremendous pent-up demand. Festivals were large part of our return to live this summer with many of our festivals selling out in record time, and then overall ticket sales for major festivals was up 10% versus 2019. Then we had a number of our tours are already sell over 500, 000 tickets for tours this year, including sellout tours by Harry Styles, Chris Stapleton, and others. In addition to increasing attendance, strong demand also enabled improving pricing with average amphitheater and major festival pricing up double-digits relative to 2019, and at our shows, fans spend at record levels with onsite spending per fan up over 20% in both amphitheaters and festivals compared to 2019. As a result, our sponsorship and advertising business delivered over $100 million in AOI for the quarter, the first time at this level since Q3 of 2019. And through mid-October, we have already sold 22 million tickets for our shows in 2022 and demand has been stronger than ever for many of these on sales, with a million tickets sold for each of the Coldplay and Red-Hot Chili Peppers tours, and several other tours already selling over 500,000 tickets. Ticketmaster is on sale for 2022 also reinforcing this demand, as we expect Q4 transacted fee-bearing GTV to be at record level, even after already selling 65 million fee-bearing tickets for events next year. Ticketmaster also added clients represented in over 14 million net new fee-bearing tickets so far this year, further accelerating its growth on a global basis. At the same time, we are continuing our cost focused deliver $200 million in structural savings from our pre -pandemic 2020 plan, making us nimbler and better positioned to invest for future growth. These markets accounted for 95% of our fans in Q3 versus 75% in Q3 of 2019. And they represented 90% of fee-bearing GTV in Q3 versus 80% in Q3 of 2019. Second, our concerts activity primarily ramped up in August with 90% of our attendance for shows occurring in August and September. With almost 1200 amphitheater shows played off, these shows give us the best data set for comparing to 2019. On pricing, average ticket pricing at our amphitheaters was up 17% to $63. First, ticket pricing, including more platinum and VIP tickets for shows this year, increased average ticket pricing by $7. Secondly, our concert week promotion and other promotions were smaller-scale this year, which had an impact of $2 per ticket. Then for onsite spending, average fan spending was up 25% to $36. And the shift to cashless also helped as card transactions have historically been larger than cash transactions, and this has held up as we shifted to 100% cashless. Turning now to Ticketmaster, as Michael said, Ticketmaster had a record AOI of a $172 million for the quarter, driven by its fourth highest fee-bearing GTV quarter excluding refunds, and lower cost structure from its reorganization. Primary ticketing was driven substantially by concerts, which accounted for over 70% of fee-bearing GTV, while sports was the second largest category, and together they represented approximately 90% of all fee-bearing GTV. Geographically, North America accounted for 80% of fee-bearing GTV as activity remained limited internationally outside the UK. In secondary ticketing, we similarly saw concerts and sports account for over 90% of fee-bearing GTV, though in this case, sports were the primary driver with the launch of new football and basketball seasons. Another contributor to our growth in ticketing is the continued signing of new clients with over 14 million net new fee-bearing tickets added this year through the third quarter. These new client additions have been particularly strong internationally, accounting for 2/3 of our new client tickets. Finally, sponsorship AOI surpassed a $100 million in the quarter for the first time in two years as it again had available ad units at scale, both on-site and online. Like our other businesses, it was largely U.S. and UK driven together accounting for approximately 90% of total activity. With ticketing we expect a broader recovery as most European markets put stadium and arena tours on sale in Q4, enabling GTV levels that could approach Q4 2019 levels, despite 65 million fee-bearing tickets already being sold for 2022 events. We have free cash at $1.7 billion at the end of the quarter, which includes $450 million earmarked for the OCESA acquisition. This was our first quarter since 2019 where our cash contribution margin was higher than our cash burn, contributing a net $166 million in free cash. We also added $850 million in cash in the quarter through our $400 million drawdown of our Term A loan and $450 million equity raise for ASESA, mentioned previously. We then had free cash reduced by $370 million, largely resulting from long-term deferred revenue shifting into short-term for show's next summer as we previously indicated would be happening. This improved cash position was also helped by our ongoing cost and cash management program as this year, we expect to reduce costs by $900 million and cash spend by $1.5 billion relative to pre -pandemic plans and on the cash, side excluding ASESA. As we prepare for 2022 plans, we remain confident that we have structurally reduced our operating costs by $200 million relative to our pre -pandemic 2020 plans. Our deferred revenue at the end of the quarter was $1.9 billion. This is compared to $950 million at the end of Q3 of 2019, which gives us the best like for like view of the demand pipeline already in place.

And through mid-October, we have already sold 22 million tickets for our shows in 2022 and demand has been stronger than ever for many of these on sales, with a million tickets sold for each of the Coldplay and Red-Hot Chili Peppers tours, and several other tours already selling over 500,000 tickets.

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Sales totaled $439 million for the third quarter, an increase of 10% from the third quarter last year and an increase of 9% at consistent currency translation rates. Acquisitions added 1 percentage point of growth in the quarter. Net earnings totaled $114 million for the quarter or $0.66 per diluted share. After adjusting for the impact of excess tax benefits from stock option exercises and other non-recurring tax items, net earnings totaled $102 million or $0.59 per diluted share. Impairment charges totaled $300,000 in the quarter and $35.2 million year-to-date. The reported tax rate was 6% for the quarter, down 7 percentage points from last year. On an adjusted basis, the rate in the quarter was 16% as compared to 20% in the first half of 2020. Excluding the effect from excess tax benefits related to stock option exercises, and other one-time items, our tax rate is expected to be 18% to 19% for both the fourth quarter and the full year. Cash flow from operations totaled $263 million year-to-date as compared to $299 million last year, primarily due to lower operating earnings and increases in working capital. Capital expenditures totaled $46 million year-to-date as we continue to invest in manufacturing capabilities as well as the expansion of several locations. For the full-year 2020, capital expenditures are expected to be approximately $85 million, including approximately $50 million for facility expansion projects. On page 11 of our slide deck, we note our 6-week booking average through October 16th by segment. At current rates, the impact would have been negligible on sales and earnings for the full year, and have a full -- have a favorable impact to the fourth quarter of approximately 2% on sales and 3% on earnings, assuming the same mix of business as the prior year.

Net earnings totaled $114 million for the quarter or $0.66 per diluted share. After adjusting for the impact of excess tax benefits from stock option exercises and other non-recurring tax items, net earnings totaled $102 million or $0.59 per diluted share.

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We closed on several high-quality acquisitions across all three of our strategic investment platforms, bringing our gross acquisition volume to $500 million in 2021. We continue to see strong demand for space in our centers and signed a number of key leases with well-capitalized tenants, driving our accelerated signed not opened balance to almost $4 million. And lastly, we raised or received commitments on $670 million of capital from our equity, debt and joint venture partners, strengthening our liquidity profile and balance sheet. I am very pleased with GIC's recent commitment of an additional $500 million to our core grocery-anchored R2G platform, positioning that platform to scale up to $1.7 billion. We also recently obtained commitments for $130 million in the debt private placement market and received another $40 million through our ATM, demonstrating our ability to access multiple sources of capital to accretively fund our growth plans. Regarding the acquisition environment, we are currently experiencing a very competitive landscape to acquire high-quality shopping centers, where cap rates for grocery-anchored centers in top U.S. metros are down approximately 50 basis points over the past few months. As a result, we believe the $500 million of acquisitions that we closed on so far could be up as much as 10% relative to our transacted prices. We continue to see a healthy pipeline of deals for grocery-anchored centers, smaller strips and wealthy infill suburbs in our core communities and larger high-quality centers over $70 million, where we can allocate the real estate between our platforms. We are in lease negotiation with a premier investment-grade grocer to take that space, which will drive the occupancy to about 99%, resulting in an estimated stabilized yield on cost of 7% in a 5% cap rate market. Earlier this week, we closed on the sale of Market Plaza in the Chicago market for $30 million. We received 11 offers and sold the property at a high 5% buyer's cap rate. We also signed a new medical tenant, Piedmont Urgent Care, that replaces a sit-down restaurant at Promenade at Pleasant Hill just outside of Atlanta, swapping a high-COVID-risk tenant for an essential tenant at a mid-20% spread to the old brand. For those of you that are not familiar with Ferguson, they are a $34 billion market cap, BBB+-rated credit and the largest U.S. distributor of plumbing and second-largest distributor of industrial products. Notably, we have seen a major pickup in demand in Detroit over the past few quarters and are in negotiations on over half a dozen grocery deals and another eight to 10 box leases with discount apparel, pet, outdoor recreation and homegood retailers. Third quarter operating FFO per share of $0.27 was up $0.05 over last quarter primarily due to about $0.04 of higher NOI from acquisitions, $0.01 from lower rent not probable of collection and about $0.01 from higher lease termination fees, partially offset by lower straight-line rent. Notably, our collection rate for the third quarter was 98% as of the end of October. We signed 52 leases totaling 280,000 square feet at a blended comparable releasing spread of 8.2%, including a 5.2% renewal and 16% new lease spread. They don't capture future contractual rent steps, which were 160 basis points for the leases signed during the quarter. Leasing activity in the third quarter pushed our signed not opened balance to $3.8 million, up 19% over last quarter's $3.2 million backlog, which we expect to open over the next 15 months. On the remerchandising and outlet front, we delivered two projects totaling $3.3 million during the quarter at almost a 12% yield, which was ahead of budget. We also added one new project, Ferguson gallery showroom at Providence Marketplace in Nashville, totaling $1.3 million at an expected yield in the 20% to 22% range. This brings the active remerchandising and outlet project total to $14 million with expected yields in the 10% to 12% range. We are in active negotiations on a number of other pipeline deals totaling about $30 million with strong box demand in Boston, Florida and Detroit. We ended the third quarter with net debt to annualized adjusted EBITDA of 6.8 times, down from seven times last quarter. This is a bit better than expected as a result of the $40 million raised through our ATM and due to better NOI performance. We continue to expect our leverage to fall toward our target range of 5.5 to 6.5 times as bad debt and occupancy normalize to pre-COVID levels. We ended the third quarter with a cash balance of approximately $10 million and have $295 million available on our unsecured line of credit. During the fourth quarter, we expect to refinance $177 million of debt. We expect to use proceeds from our recent private placement of unsecured notes totaling $130 million, our share of expected proceeds from mortgages placed on R2G assets that we locked rate on totaling $15 million and proceeds from the sale of Market Plaza totaling $30 million to fund these debt repayments. Following all this activity, we will have reduced debt maturities through 2024 to just 16% of our debt stack. Over the next two quarters, we also expect to generate $96 million in disposition proceeds from parcel sales to RGMZ, including sales from our recently acquired Northborough and Newnan Pavilion assets and the remaining seed portfolio sales. These proceeds will effectively be used to fund our share of the debt of acquisition of $68 million and to repay amounts outstanding on our revolving line of credit. We initiated a new range for operating FFO of $0.90 to $0.94 per share, which is up $0.02 or 2% over prior guidance. The primary drivers of the upside were $0.01 from a prior period bad debt reversal and about another $0.01 of lease termination fees recognized in the third quarter. Our third quarter operating FFO per share of $0.27 benefited from $0.02 related to nonrecurring items, including a prior period favorable bad debt adjustment and a one-time lease termination fee. In addition, relative to our third quarter results, 2022 G-and-A is expected to increase by approximately $0.01 per quarter related to an uptick in travel-related expenses, similar to 2019 levels, and continued investments in talent to support our growth platforms. And can we fund the acquisition in a way that's both accretive to earnings and pushes us closer to our target leverage range of 5.5 to 6.5 times?

Third quarter operating FFO per share of $0.27 was up $0.05 over last quarter primarily due to about $0.04 of higher NOI from acquisitions, $0.01 from lower rent not probable of collection and about $0.01 from higher lease termination fees, partially offset by lower straight-line rent. We initiated a new range for operating FFO of $0.90 to $0.94 per share, which is up $0.02 or 2% over prior guidance. Our third quarter operating FFO per share of $0.27 benefited from $0.02 related to nonrecurring items, including a prior period favorable bad debt adjustment and a one-time lease termination fee.

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737 MAX production halt and a significant decline in the price of oil followed soon after. Last, but certainly not least, COVID-19 significantly affected end markets in all regions in the second half of our fiscal year, especially in Q4. COVID-19 protocols we successfully implemented continue to allow us to operate safely and serve customers globally. In Q4, the Company reported an organic sales decline of 33% on top of the 2% decline in the prior year quarter, which is the worst quarterly organic decline since the Great Recession in 2008. All segments reported negative organic growth for the quarter with Industrial declining by 36%, WIDIA 32%, and Infrastructure at 29% compared to negative 4% and 3% for Industrial and WIDIA and infrastructure at 1% growth in the prior year quarter. Also, all regions were negative with the Americas posting a 39% decline, EMEA 34%, and Asia Pacific 24%. Adjusted operating expenses declined 18% reflecting our cost control measures. Adjusted EBITDA margin for the quarter was 17.7%, a decrease of 330 basis points from 21% in the prior year. Turning to Slide 4, due to COVID-19, it remains difficult to forecast how our customers as well as our end-markets will be affected. As a result, we will not be providing an annual outlook for fiscal year '21. But as you know, the Company typically sees, on average, an approximately 10% seasonal decline in revenues from Q4 to Q1. Capital spending will be significantly reduced by over $100 million to be in the range of $110 million to $130 million for the full year. The benefits of these investments will continue to increase in fiscal year '21 bringing savings since inception to approximately $180 million at fiscal year-end, including total Company headcount reduced by approximately 20% and a rationalized footprint with six fewer plants and more production moving to lower-cost countries. We expect that this approach will open up a 40% increase in served market opportunity while offering better service and tooling options to our customers. For the quarter, sales declined 37% year-over-year, in line with the decline seen in April or negative 33% on organic basis to $379 million. Foreign currency had a negative effect of 2% and our divestiture contributed another negative 2%. Adjusted gross profit margin of 27.7% was down 790 basis points year-over-year. The year-over-year performance was primarily due to the effect of lower volumes and associated absorption, partially offset by cost control actions including furloughs, increasing benefits from simplification/modernization and the positive effect of raw materials, which amounted to approximately 140 basis points. Adjusted operating expenses of $68 million were down 41% year-over-year and decreased to 18% as a percentage of sales. EBITDA margin was 17.7%, down 330 basis points from the previous-year quarter. Taken together, adjusted operating margin of 8.8% was down 700 basis points year-over-year. The adjusted effective tax rate in the quarter was significantly higher at 51.2% due to the combined effects of geographical mix changes in our taxable income as well as the magnified effect of GILTI on the effective tax rate as we finalized actual full-year taxable income versus estimates. It's worth noting that our adjusted effective tax rate for the full year was approximately 33%. We reported a GAAP earnings per share loss of $0.11 versus earnings per share of $0.74 in the prior-year period, which reflects the reduced volume and higher tax rate, partially offset by our cost control actions coupled with restructuring items. On an adjusted basis, earnings per share was $0.15 per share in the quarter versus $0.84 in the prior year. Effective operations this quarter amounted to negative $0.68. This compares to negative $0.08 in the prior year period and negative $0.39 in the third quarter. The largest factor contributing to the $0.68 was the effect of significantly lower volume and associated under-absorption. This was partially offset by cost control actions, including lower variable compensation as well as positive raw materials of $0.08. Simplification/modernization contributed $0.14 in the quarter on top of the $0.10 in the prior year. This brings the total FY '20 simplification/modernization savings to $0.46. As Chris mentioned, our expectations for FY '21 is that the simplification/modernization benefits will be in the range of $0.80, driven by actions already taken or announced. In terms of benefits from our restructuring program, the savings from our FY '20 restructuring actions delivered approximately $33 million in run rate annualized savings at the end of FY '20. FY '21 restructuring actions are expected to contribute an additional $65 million to $75 million of annualized run rate savings by the end of FY '21. Slide 9 through 11 details the performance of our segments this quarter. Industrial sales in Q4 declined 36% organically on top of a 4% decline in the prior year period. All regions posted year-over-year sales declines with the largest decline in the Americas at negative 40% followed by EMEA at 38% and Asia-Pacific at 27%. From an end market perspective, the weakness in demand remains broad based, with significant declines in transportation and general engineering down 45% and 32% respectively. Adjusted operating margin came in at 7.7% compared to 18.3% in the prior year quarter. The decrease was primarily driven by the decline in volume and associated under-absorption, partially offset by reduced variable compensation and other cost control actions, increased simplification/modernization benefits and a 90 basis point benefit from raw materials. On a sequential basis, adjusted operating margin decreased 540 basis points as lower volumes were partially offset by aggressive cost control actions and lower variable compensation. Sales declined 32% on top of a negative 3% in the prior year period. Regionally, the largest decline this quarter was in Asia Pacific down 41%, the Americas 31% and EMEA 28%. Adjusted operating margin for the quarter was negative 2.9% due to volume declines, partially offset by lower variable compensation and other cost control actions, a raw material benefit of 220 basis points, and increased simplification/modernization benefits. Organic sales declined 29% versus positive 1% in the prior year period. Other items that negatively affected Infrastructure sales included a divestiture of 4%, FX of 2% and fewer business days of 1%. Regionally, the largest decline was in the Americas at 39%, then EMEA at 22%, and Asia-Pacific at 14%. By end market, these results were primarily driven by energy, which was down 47% year-over-year, given the extreme drop in oil prices and the corresponding decline in the U.S. land-only rig count. General Engineering and Earthworks were down 31% and 17% respectively. Adjusted operating margin of 12.7% remained relatively stable sequentially, but decreased 280 basis points from the prior year margin of 15.5%. This decrease was mainly driven by lower volumes and associated under-absorption, partially offset by reduced variable compensation and other cost control actions, favorable raw materials that contributed 200 basis points and benefits from simplification/modernization. Before I review the numbers, like I did last quarter, I would like to emphasize that we view liquidity as extremely important, particularly in these uncertain times. Our current debt maturity profile is made up of two $300 million notes maturing in February of 2022 and June of 2028 as well as a U.S. $700 million revolver that matures in June of 2023. At fiscal year-end, we had combined cash and revolver availability of approximately $800 million. Primary working capital decreased both sequentially and year-over-year to $596 million. On a percentage of sales basis, it increased to 35.4%, a reflection of the significant decline in sales in the quarter. Net capital expenditures were $38 million, a decrease of approximately $20 million from the prior year, bringing the total capital spend for the year to $242 million as expected. Our fourth quarter free operating cash flow was $39 million and represents a year-over-year decline, reflecting lower income due to volume and increased cash restructuring cost. Total free operating cash flow for the full year was negative $18 million. In addition, we paid the dividend of $17 million in the quarter. As I mentioned earlier, we expect increased simplification/modernization benefits of approximately $80 million in FY '21. As we think about the temporary cost control actions that we've announced in June, they will generate a savings of $10 million to $15 million per quarter in the first half of FY '21 relative to the first half of FY '20. Depreciation and amortization will step up to a range of approximately $130 million to $140 million compared to approximately $120 million in FY '20. We currently expect our full year tax rate in FY '21 to be similar to the 33% adjusted effective tax rate we saw in FY '20, but it could fluctuate significantly in any given quarter depending on the effects of geographical mix and the sensitivity to lower pre-tax income. Regardless of the effective tax rate, we expect cash taxes in FY '21 to be approximately $10 million less than the $37 million paid in FY '20. In regard to free operating cash flow, capital expenditures will be significantly lower versus last year, as Chris mentioned, by approximately $120 million. We currently expect cash restructuring charges to be $25 million to $35 million higher in FY '21 with the majority of this increase in the first half. Finally, we'll continue to pursue our strategic growth initiatives so that we can position the Company for profitable growth and share gain as end markets recover and to achieve our adjusted EBITDA profitability target when sales reach a top line range of $2.5 billion to $2.6 billion.

Last, but certainly not least, COVID-19 significantly affected end markets in all regions in the second half of our fiscal year, especially in Q4. COVID-19 protocols we successfully implemented continue to allow us to operate safely and serve customers globally. Turning to Slide 4, due to COVID-19, it remains difficult to forecast how our customers as well as our end-markets will be affected. As a result, we will not be providing an annual outlook for fiscal year '21. Capital spending will be significantly reduced by over $100 million to be in the range of $110 million to $130 million for the full year. For the quarter, sales declined 37% year-over-year, in line with the decline seen in April or negative 33% on organic basis to $379 million. We reported a GAAP earnings per share loss of $0.11 versus earnings per share of $0.74 in the prior-year period, which reflects the reduced volume and higher tax rate, partially offset by our cost control actions coupled with restructuring items. On an adjusted basis, earnings per share was $0.15 per share in the quarter versus $0.84 in the prior year. Before I review the numbers, like I did last quarter, I would like to emphasize that we view liquidity as extremely important, particularly in these uncertain times.

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Our average buyer is putting more than 15% down and has a credit score in excess of 740. We are proud of our results as we continue to gain market share and improve our profitability throughout every one of our 15 markets. During the quarter we sold an all-time quarterly record of 3,109 homes, 49% better than a year ago. Our absorption pace per community improved significantly to 5.3 sales per community compared to 3.1 sales per community a year ago. Smart Series sales comprised nearly 35% of total companywide sales during the quarter compared to 30% a year ago and just 16% in 2019. We are selling our Smart Series product in all 15 of our divisions and in roughly one-third of our communities. Homes delivered during the quarter increased 35% and were a first quarter record. Revenues increased 43% and also represented a first quarter record. Gross margins improved by 420 basis points to 24.4% and our overhead expense ratio improved by 120 basis points. As a result, our pre-tax income was an all-time quarterly record of $110 million, 167% better than a year ago with a pre-tax income percentage of 13.3% compared to 7.2% last year. These strong returns resulted in a 25% return on equity improving from the 22% full year return on equity we had in 2020. Specifically, since 2013 our revenues have grown at a compounded annual rate of 19% and our pre-tax income has grown at an even more impressive annual rate of 43%. Companywide, our backlog sales value at the end of the quarter was a record $2.4 billion, 82% better the last year. And our units in backlog increased by 68% to an all-time record 5,479 homes, with an average price in backlog of $433,000, nearly 10% higher than the average price in backlog last year at this time. As I indicated earlier, all 15 of our homebuilding divisions contributed significantly to our first quarter performance. We divide our 15 markets into two regions. New contracts in the Southern region increased 46% during the quarter. In the Northern region, new contracts increased 53% during the quarter. Our deliveries increased 34% in the Southern region during the quarter to 1,218 deliveries or 60% of the total. The Northern region contributed the balance 801 deliveries, an increase of 36% over last year. Our owned and controlled lot position in the Southern region increased by 35% compared to last year and increased by 8% in the Northern region compared to last year. 35% of our owned and controlled lots are in our Northern region, while the balance roughly 65% are located in the Southern region. Companywide we own approximately 16,800 lots, which is roughly -- slightly less than a two-year supply. On top of that, we control via option contracts an additional 2500 lots. So, in total, our owned and controlled lots approximate 42,000 single-family lots, which is just under a five-year supply. Importantly and worth noting, 60% of those lots of controlled under option contracts, which gives M/I Homes significant flexibility to react to changes in demand or individual or unexpected market conditions. We had 100 communities in the Southern region at the end of the quarter, which is down from 125 a year ago. In the Northern region, we had 87 communities at the end of the quarter, which is down 11% from the 98 we had last year at this time. Our financial condition is very strong with $1.4 billion of equity at the end of the quarter and the book value of $46.37 per share. We ended the first quarter with a cash balance of $293 million and zero borrowings under our $500 million unsecured revolving credit facility. This resulted in a 32% debt to cap ratio, down from 39% a year ago and a net debt to cap ratio of 21%. As far as our financial results, new contracts for the first quarter increased 49% to 3,109, an all-time quarterly record compared to last year's first quarter 2,089. Our new contracts were up 68% in January, up 21% in February and up 64% in March and our sales pace was 5.3 for the first quarter compared to last year's 3.1. And our cancellation rate for the first quarter was 7%. As to our buyer profile, about 56% of our first quarter sales were to first time buyers compared to 53% in the fourth quarter of last year. In addition, 43% of our first quarter sales were inventory homes, the same as 2020's fourth quarter. Our community count was 187 at the end of the first quarter compared to 223 at the end of 2020's first quarter. The breakdown by region is 87 in the Northern region and 100 in the Southern region. During the quarter, we opened 21 new communities, while closing 36. And last year's first quarter, we opened 17 new communities. We delivered a first quarter record of 2,019 homes, delivering 46% of our backlog compared to 56% a year ago. Revenue increased 43% in the first quarter, reaching the first quarter record of $829 million and our average closing price for the first quarter was $395,000, a 6% increase when compared to last year's first quarter average closing price of $374,000 and our backlog average sale price is $433,000, up from $399,000 a year ago and our backlog average sales price of our Smart Series is $335,000. Our first quarter gross margin was 24.4%, up 420 basis points year-over-year. Our first quarter SG&A expenses were 11% of revenue, improving a 120 basis points compared to 12.2% a year ago, reflecting greater operating leverage. Interest expense decreased $3.5 million for the quarter compared to the same period last year and interest incurred for the quarter was $10.2 million compared to $11.9 million a year ago and the decrease is due to lower outstanding borrowings in this year's first quarter as well as a lower weighted average borrowing rate. Our pre-tax income was 13.3% versus 7.2% a year ago and our return on equity was 25% versus 15% a year ago. During the quarter, we generated $125 million of EBITDA compared to $59 million in last year's first quarter and we generated $75 million of positive cash flow from operations in the first quarter compared to using $24 million a year ago. We have $22 million in capitalized interest on our balance sheet, about 1% of our total assets and our effective tax rate was 23% in this year's first quarter, the same as last year's first quarter. And we estimate our annual effective rate this year to be around 24%. And our earnings per diluted share for the quarter increased to $2.85 per share from $1.09 per share last year. Revenue was up 120% to $29.6 million due to a higher volume of loans closed and sold, along with higher pricing margins than we experienced last year. For the quarter, pre-tax income was $19.7 million, which was up 250% over 2020's first quarter. The loan to value on our first mortgages for the quarter was 84%, same as 2020's first quarter. 78% of the loans closed in the quarter were conventional and 22% FHA or VA. This compared to 72% and 28%, respectively, for 2020's first quarter. Our average mortgage amount increased to $328,000 compared to $306,000 last year. Loans originated increased to a first quarter record of 1,575 loans, 39% more than last year. And the volume of loans sold increased by 50%. Our borrower profile remains solid with an average down payment of over 15% and an average credit score on mortgages originated by M/I Financial of 746, up from 745 last quarter. Our mortgage operation captured over 84% of our business in the first quarter, which was in line with 85% last year. We maintain two separate mortgage warehouse facilities with combined availability of $215 million that provide us with funding for our mortgage originations prior to the sale to investors. At March 31, we had a total of $176 million outstanding under these facilities which expire in May and October of this year. As far as the balance sheet, our total homebuilding inventory at March, 31 was $2 billion, an increase of $138 million from March 31, '20. Our unsold land investment at March 31 of this year is $742 million compared to $809 million a year ago. At March 31, we had $426 million of raw land and land under development and $316 million of finished unsold lots. We owned 4,227 unsold finished lots with an average cost of $75,000 per lot and this average lot cost is 17% of our $433,000 backlog average sale price. During this year's first quarter, we spent $92 million on land purchases and $71 million on land development for a total of $163 million, which was up from $138 million in last year's first quarter. And in the first quarter of this year, we purchased 2,500 lots of which 75% were raw. In last year's first quarter, we purchased 1,800 lots of which 70% were raw. We have a strong land position at March 31, controlling 42,000 lots, up 24% from a year ago, and of the lots controlled, 40% are owned about a five-year supply. And at the end of the quarter, we had 98 completed inventory homes and 708 total inventory homes and of the total inventory 423 homes are in the Northern region and 285 are in the Southern region. At March 31 last year, we had 556 completed inventory homes and 1,322 total inventory homes.

Companywide, our backlog sales value at the end of the quarter was a record $2.4 billion, 82% better the last year. Revenue increased 43% in the first quarter, reaching the first quarter record of $829 million and our average closing price for the first quarter was $395,000, a 6% increase when compared to last year's first quarter average closing price of $374,000 and our backlog average sale price is $433,000, up from $399,000 a year ago and our backlog average sales price of our Smart Series is $335,000. And our earnings per diluted share for the quarter increased to $2.85 per share from $1.09 per share last year.

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And with more than 17,500 stores located within 5 miles of about 75% of the US population, we believe we are well positioned to continue supporting our customers through our unique combination of value and convenience. As we continue to lap difficult quarterly sales comparisons from the prior-year, net sales decreased 0.4% to $8.7 billion, followed by a 24.4% increase in Q2 of 2020. Comp sales declined 4.7% compared to the prior-year period, which translates into a robust 14.1% increase on a two-year stack basis. As a reminder, gross profit in Q2 2020 was positively impacted by a significant increase in sales, including net sales growth of 41% in our combined non consumables categories. For Q2 2021, gross profit as a percentage of sales was 31.6%, a decrease of 80 basis points, but an increase of 87 basis points compared to Q2 2019. SG&A as a percentage of sales was 21.8%, an increase of 138 basis points. Moving down the income statement, operating profit for the second quarter decreased 18.5% to $849.6 million. As a percentage of sales, operating profit was 9.8%, a decrease of 219 basis points. Our effective tax rate for the quarter was 21.4% and compares to 21.5% in the second quarter last year. Finally earnings per share for the second quarter decreased 13.8% to $2.69, which reflects a compound annual growth rate of 27.7% or 24.3% compared to Q2 2019 adjusted earnings per share over a two-year period. Merchandise inventories were $5.3 billion at the end of the second quarter, an increase of 20% overall and 13.7% on a per store basis, as we continue to cycle unusually low levels of inventory in Q2 2020 which were driven by extremely strong sales volumes in that quarter. Year-to-date through Q2 we generated significant cash flow from operations totaling $1.3 billion. Total capital expenditures for the quarter were $518 million and included our planned investments in new stores, remodels and relocations, distribution and transportation projects and spending related to our strategic initiatives. During the quarter, we repurchased 3.3 million shares of our common stock for $700 million and paid a quarterly dividend of $0.42 per common share outstanding at a total cost of $98 million. At the end of Q2, the remaining share repurchase authorization was $979 million. We also remain committed to returning excess cash to shareholders through anticipated share repurchases in quarterly dividend payments, all while maintaining our current investment grade credit rating and managing to a leverage ratio of about 3 times adjusted debt-to-EBITDA. Net sales growth of 0.5% to 1.5%; a same-store sales decline of 3.5% to 2.5% which reflects growth of approximately 13% to 14% on a two-year stack basis and earnings per share in the range of $9.60 to $10.20, which reflects a compound annual growth rate in the range of 20% to 24% or approximately 19% to 23% compared to 2019 adjusted earnings per share over a two-year period. Our earnings per share guidance assumes an effective tax rate in the range of 22% to 22.5%. With regards to share repurchases, we now expect to repurchase approximately $2.4 billion of our common stock this year, compared to our previous expectation of about $2.2 billion. Finally, we are increasing our expectations for capital spending in 2021 to a range of $1.1 billion to $1.2 billion to reflect higher equipment costs for store projects in the pull forward of select supply chain investments. Finally, please keep in mind that the third quarter represents our most challenging lap of the year from a gross profit rate perspective, following an improvement of 178 basis points in Q3 2020. With regards to SG&A, we now expect about $70 million to $80 million of incremental year-over-year investments in our strategic initiatives as we further their rollouts. This amount includes $40 million in incremental investments made during the first half of the year. The NCI offering was available in more than 8,800 stores at the end of Q2, and we continue to be very pleased with the strong sales and margin performance we are seeing across our NCI store base. In fact this performance is contributing to an incremental 1% to 2.5% total comp sales increase in NCI stores and a meaningful improvement in gross margin rate as compared to stores without the NCI offering. Overall, we remain on track to expand this offering to a total of more than 11,000 stores by year-end, including over 2,100 stores in our light version, with the goal of completing the rollout of NCI across nearly the entire chain by year-end 2022. POpshelf aims to engage customers by offering a fun, affordable and differentiated treasure hunt experience, delivered through continually refreshed merchandise, a differentiated in-store experience and exceptional value with the vast majority of our items priced at $5 or less. During the quarter we opened eight new pOpshelf locations, bringing the total number of stores to 16, including four conversions of a traditional Dollar General store into our pOpshelf concept. For 2021, we remain on track to have a total of up to 50 pOpshelf locations by year-end as well as up to an additional 25 store-within-a-store concepts as we continue to lay the foundation for future growth. I'm very pleased to report that during the quarter, we completed the initial rollout of DG Fresh across the entire chain and are now delivering to more than 17,500 stores from 12 facilities. For example, we recently introduced about 25 new and exclusive items under the Armor [Phonetic] brand, as we continue to optimize our assortment, while further differentiating our product offering from others. And while produce was not included in our initial rollout plans, we believe DG Fresh provides a potential path to accelerating our produce offering in up to 10,000 stores over time as we look to further capitalize on our extensive self-distribution capabilities. During the first half, we added more than 34,000 cooler doors across our store base and remain on track to install approximately 65,000 cooler doors this year. In the second quarter, we completed a total of 772 real estate projects, including 270 new stores, 477 remodels and 25 relocations. For the full year, we remain on track to open 1,050 new stores, remodel 1,750 stores and relocate 100 stores. In addition, we now have produce in more than 1,500 stores with plans to expand this offering to a total of more than 2,000 stores by year end. As a reminder, we recently made key changes to our development strategy, including establishing our larger 8,500 square foot format as our base prototype for nearly all new stores going forward. In total, we expect to have nearly 2,000 stores in this format by the end of the year, as we look to further enhance our value and convenience proposition particularly in rural America. In fact, we ended Q2 with nearly 4 million monthly active users on the app, a 28% increase over prior year. Of note, during the first half, the number of campaigns on our platform increased 65% compared to the prior year period, and we are very excited about the growth potential of this business as we look to further enhance the value proposition for both our customers and brand partners. Self checkout was available in approximately 4,300 stores at the end of Q2, and we continue to be pleased with our results, including customer adoption rates and higher overall satisfaction scores in stores that include this offering. As evidenced, we recently launched a national hiring event with the goal of hiring up to an additional 50,000 employees by Labor Day, and I am pleased to note that we are on track to meet our goal. We believe the opportunity to start and develop a career with a growing and purpose-driven company is a unique competitive advantage and remains our greatest currency in attracting and retaining talent, and because over 75% of our store associates at or above the lead sales associate position were internally placed, employees who joined Dollar General know, they have an opportunity to grow their career with us. We also held our annual leadership meeting earlier this month, resulting in a rich and virtual development experience for more than 1,500 leaders of our company.

As we continue to lap difficult quarterly sales comparisons from the prior-year, net sales decreased 0.4% to $8.7 billion, followed by a 24.4% increase in Q2 of 2020. Comp sales declined 4.7% compared to the prior-year period, which translates into a robust 14.1% increase on a two-year stack basis. Moving down the income statement, operating profit for the second quarter decreased 18.5% to $849.6 million. Finally earnings per share for the second quarter decreased 13.8% to $2.69, which reflects a compound annual growth rate of 27.7% or 24.3% compared to Q2 2019 adjusted earnings per share over a two-year period. Merchandise inventories were $5.3 billion at the end of the second quarter, an increase of 20% overall and 13.7% on a per store basis, as we continue to cycle unusually low levels of inventory in Q2 2020 which were driven by extremely strong sales volumes in that quarter. Net sales growth of 0.5% to 1.5%; a same-store sales decline of 3.5% to 2.5% which reflects growth of approximately 13% to 14% on a two-year stack basis and earnings per share in the range of $9.60 to $10.20, which reflects a compound annual growth rate in the range of 20% to 24% or approximately 19% to 23% compared to 2019 adjusted earnings per share over a two-year period.

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Yesterday, we reported first quarter net income of $167 million or $1.75 per share. First quarter net income included special items expenses of $0.02 per share related to closure costs for certain corrugated products facilities and specific costs related to discontinuing paper operations associated with the previously announced conversion of the No. 3 machine at our Jackson, Alabama mill to linerboard. Excluding the special items, first quarter 2021 net income was $169 million or $1.77 per share compared to the first quarter 2020 net income of $143 million or $1.50 per share. First quarter net sales were $1.8 billion in 2021 and $1.7 billion in 2020. Total company EBITDA for the first quarter, excluding special items was $342 million in 2021 and $311 million in 2020. Excluding the special items, the $0.27 per share increase in first quarter 2021 earnings compared to the first quarter of 2020 was driven primarily by higher volumes for $0.45 and prices and mix $0.31 in the Packaging segment and lower annual outage expenses for $0.12. The items were partially offset by lower volumes, $0.28, and prices and mix of $0.03 in the Paper segment. Operating costs were $0.15 per share higher, primarily due to inflation-related increases, particularly in the areas of labor and benefits expenses, and fiber costs and energy. We also had inflation-related increases in our converting costs, which were $0.02 per share higher. For the last three quarters, freight and logistics costs have risen and were $0.12 per share higher in the first quarter compared to last year. We also had other expenses of $0.01 per share. EBITDA excluding special items in the first quarter of 2021 of $352 million with sales of $1.6 billion resulted in a margin of 22% versus last year's EBITDA of $290 million and sales of $1.5 billion or a 20% margin. As Mark mentioned, corrugated products and containerboard demand were very strong during the quarter, total volume in our corrugated products plants was up 6.6% versus last year and equal the all-time record for total box shipments that we just set in the fourth quarter of 2020. Shipments per day were up 8.3% over last year, which set a new first quarter record for us. Strong domestic demand drove outside sales volume of containerboard 13% above last year's first quarter. Domestic containerboard and corrugated products prices and mix together were $0.26 per share above the first quarter of 2020 and up $0.52 per share compared to the fourth quarter of 2020 as we continued to implement our November 2020 announced price increases during the quarter and we began the implementation of our announced March increase. Export containerboard prices were up $0.05 per share versus last year's first quarter and up $0.04 per share compared to the fourth quarter of 2020. Looking at our Paper segment, EBITDA excluding special items in the first quarter was $16 million with sales of $165 million or a 10% margin compared to the first quarter of 2020's EBITDA of $42 million and sales of $217 million or a 19% margin. As expected, sales volume was about 22% below last year as we ran only one machine at the Jackson, Alabama mill this quarter versus both machines running in the first quarter of 2020. First quarter paper prices and mix were almost 3% below last year, however, prices began to move higher in the latter part of the quarter, resulting from the announced paper price increases and averaged 1% higher than fourth quarter 2020 average prices. 3 machine at our Jackson, Alabama mill from paper to linerboard, we have not only avoided the significant cost issues associated with extended paper market downtime, but we've also enhanced our capabilities, as well as the profitability in our Packaging segment. For the first quarter, we generated cash from operations of $192 million and free cash flow of $107 million. The primary uses of cash during the quarter included capital expenditures of $85 million and common stock dividends of $95 million. We ended the quarter with $983 million of cash on hand or $1.1 billion, including marketable securities. Our liquidity at March 31st was $1.5 billion. Current plans and scope of work for the scheduled maintenance outages at our containerboard mills has changed and the new total company estimated cost impact for the year is $0.97 per share. The actual impact in the first quarter was $0.10 per share and the revised estimated impact by quarter for the remainder of the year is now $0.30 per share in the second quarter, $0.16 in the third and $0.41 per share in the fourth quarter. Also, our capital spending estimate for the year has changed to a range of $650 million to $675 million as we have now announced our plans for the conversion of the No. 3 paper machine at our Jackson Mill to linerboard. 3 machine at Jackson, Alabama, our current plans are to continue running the machine on linerboard as demand wards in a manner similar as to how we ran in the first quarter until the scheduled first phase outage is taken in the second quarter of 2022. The converted machine is expected to operate at an initial production rate of approximately 75% of its new capacity. The second phase outage work is planned for mid-2023 with the machine reaching its run rate capacity of 2,000 tons per day by the end of 2023. 1 paper machine at Jackson, Alabama and both machines at our International Falls, Minnesota Mill, which is capable of producing all of Jackson's paper grades. Looking ahead, as we move from the first and into the second quarter, in our Packaging segment, we expect demand to remain strong and we will continue implementing our previously announced paper price increases. We also expect export prices to move higher. In the Paper segment, we expect volumes to be fairly flat with higher average prices and mix as we continue the rollout of our recently announced paper price increase. The second quarter will be our busiest of the year for planned annual outages in the Packaging segment with work scheduled at four of the mills. Outage expenses are estimated to be approximately $0.20 per share higher compared in the -- to the first quarter.

Yesterday, we reported first quarter net income of $167 million or $1.75 per share. Excluding the special items, first quarter 2021 net income was $169 million or $1.77 per share compared to the first quarter 2020 net income of $143 million or $1.50 per share. First quarter net sales were $1.8 billion in 2021 and $1.7 billion in 2020. Looking ahead, as we move from the first and into the second quarter, in our Packaging segment, we expect demand to remain strong and we will continue implementing our previously announced paper price increases. We also expect export prices to move higher. In the Paper segment, we expect volumes to be fairly flat with higher average prices and mix as we continue the rollout of our recently announced paper price increase. The second quarter will be our busiest of the year for planned annual outages in the Packaging segment with work scheduled at four of the mills.

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Off-premise, in March, both IHOP and Applebee's off-premise sales reached absolute dollar levels, higher than when the restaurants were 100% off-premise in 2020, indicating the staying power of this largely incremental business. We achieved revenue of $204.2 million and EBITDA of $58.1 million, reflecting strong underlying performance across our business. Cash, we generated free cash flow of $30.7 million which, in part, enabled us to repay our $220 million revolver in early March. And also importantly, our franchisees opened 10 new restaurants during the quarter, indicating that they're beginning to pivot toward growth. Number one, we are an asset-light 98% franchise model that is a significant generator of cash. Here's what we have today that no one could have even imagined pre COVID. Applebee's and IHOP are collaborating with their franchisees on the 17th and 19th with the goal of hiring more than 20,000 new team members, and we're making it easy to apply via text, email and in-person, and both brands are leveraging very creative social campaigns to generate interest. And third, we're making investments to improve the guest experience in our portfolio of 69 company-owned Applebee's restaurants in the Carolinas, which by the way, consistently ranked among the top performers in the domestic Applebee's system based on sales. So these three investments that I just mentioned are largely an investment in capex, and they represent an additional $5 million in capex since we last spoke. At the end of the first quarter, 99% of our domestic restaurants were open for dining operations, with restrictions in some states. I'm pleased to reiterate that we repaid the $220 million drawdown from our revolving credit facility in early March 2021 as planned. We now expect to achieve an annual interest savings of approximately $5 million. We ended the first quarter with total unrestricted cash of $179.6 million. This compares to unrestricted cash of $163.4 million for the fourth quarter of last year, excluding the $220 million that was drawn against our revolving credit facility, a 10% increase. For the first quarter, adjusted earnings per share was $1.75 compared to $1.45 for the same quarter of 2020. Gross profit for our Applebee's company-owned restaurants increased 5.9 percentage points to 9% for the first quarter compared to the same quarter in 2020. Rental segment revenue for the first quarter of 2021 was $26.1 million compared to $29 million for the same period last year. Rental segment gross profit was 19.8% for the first quarter of 2021. This represents sequential improvement of 12 percentage points compared to the fourth quarter of 2020, which was more heavily impacted by charges related to the planned closures of underperforming IHOP restaurants. Our effective tax rate for the first quarter of 2021 was negative 6.6% compared to 23.2% for the same quarter of 2020. G&A for the first quarter of 2021 was $39.9 million compared to $37.6 million for the same quarter of last year. Cash from operations for the first quarter of 2021 was $30.6 million compared to $29.6 million for the same quarter last year. Our highly franchised model continues to generate strong adjusted free cash flow of $30.7 million for the first quarter of 2021 compared to $27.5 million for the same quarter in the prior year. As a result of our progressive recovery, we chose to repay the $220 million drawn against the revolver in early March. As of March 31, 78% of the $61.9 million in royalty, advertising fees and rent payment deferrals that Dine Brands provided to 223 franchisees across both brands has been repaid. We just delivered the two highest monthly sales volumes Applebee's has achieved since the inception of Dine in 2008. In fact, it's quite likely March and April represent two of our all-time highest volume months in the 40-year history of the brand, but I really can't confirm this as our database only goes back 13 years. What I can confirm is that March comp sales were positive 6.1% versus 2019, reflecting the confluence of consumer stimulus, compelling marketing and most importantly, operational excellence. Momentum continued to accelerate in April as Applebee's delivered a plus 11.4% comp sales result versus that same 2019 baseline. According to Black Box, 2021 comp sales versus 2019, as John referenced, Applebee's has now significantly outperformed the casual dining category for 12 consecutive weeks. And get this, an average of 560 basis points. In many respects, this is reminiscent of Q1 of last year when we posted 10 consecutive weeks of positive comps before the emergence of COVID. Equally important to our guests is the innovation our team continues to deliver behind Applebee's $5 Mucho Cocktails, as we begin to see the alcohol business steadily return to pre-COVID normalcy. For both March and April, Applebee's restaurant sales averaged an impressive $54,000 per week. It's worth noting here that our off-premise volume has held steady between $17,000 and $18,000 per week per restaurant reflecting the staying power of this off-premise business. For the month of April, Applebee's sales mix consisted of a 67% dine in, 20% Carside To-Go and 13% delivery. Included in this delivery segment is our new virtual brand, Cosmic Wings, and after about 10 weeks in market, Cosmic Wings sales have averaged about $330 per restaurant per week with significant geographic variability, reflecting Uber Eats coverage. For context, individual restaurants range from a low of $100 per week to a high of $2,000 per week. I'm very encouraged with the integration of handheld tablets in about 500 Applebee's restaurants. Additionally, one of the positive outcomes of this past year was the approximate 33% reduction in our core menu and the simplification of our operation. Our first quarter comp sales improved sequentially by 8.9 percentage points compared to the fourth quarter. Average weekly sales were approximately $26,000 for January and sequentially increased to just under $36,000 from March, reaching a high for the quarter of approximately $40,000. Regarding our domestic restaurants opened for business, 97% of restaurants were opened for dine-in service with restrictions in most states as of March 31. That compares to only 70% with dine in as of December 31. With guests eager to return to in restaurant dining, we're pleased that California recently increased indoor restaurant capacity to 50%. IHOP's presence in California makes up approximately 13% of our domestic business. We launched IHOPPY Hour in September of last year to offer our guests a broad selection of value options during those nonpeak daypart hours, mainly two to 10 p.m. IHOPPY Hour continues to drive incremental sales even as business improves across all of our dayparts. Burritos & Bowls perfectly filled the gap we had in our menu and continues to capture 8% to 10% of total ticket order incidents since we launched it with really minimal promotion. Despite capacity restrictions generally being eased across the country in the first quarter, our off-premise sales held steady at 33.3% of total sales. For the first quarter, our sales mix consisted of 66.7% dine-in, 16.8% to go and 16.4% delivery. In fact, our weekly off-premise sales in March reached dollar levels higher than we were 100% off-premise last year, even at the higher than shutdowns. We believe the brand can potentially exceed its historical annual average of approximately 60 new restaurants opened over the last decade. We made great progress over the last 12 months. And after 13 months of being locked in our houses, we, Americans, are ready to do that. I've finally gotten to do that in the last couple of weeks, and it's truly energizing and invigorating and what impressed me the most on my recent visits to our restaurants is that even after 13 months of extreme challenge, I was greeted with unbelievable enthusiasm and optimism about the future.

We achieved revenue of $204.2 million and EBITDA of $58.1 million, reflecting strong underlying performance across our business. Here's what we have today that no one could have even imagined pre COVID. At the end of the first quarter, 99% of our domestic restaurants were open for dining operations, with restrictions in some states. For the first quarter, adjusted earnings per share was $1.75 compared to $1.45 for the same quarter of 2020.

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From Stephen Curry scoring 57 points, the eighth time he scored more than 50 in a game, to Chase Yarn winning the NFL Defensive Rookie of the year and Joel Embiid putting up 33 to keep the 76ers in first place to Jordan Spieth posting a career-best 10 birdies in a round, there was no shortage of UA highlights this weekend. 7 for the gold quarterback, Tom Brady, as he had led the Tampa Bay Buccaneers for their second-ever Super Bowl victory. In his 10 years as an Under Armour athlete, Tom has exemplified what perseverance, hard work and leadership can do in pursuit of excellence. In 2020, we stuck to our playbook and leaned heavier into brand and product marketing to support successful introductions like our Project Rock collection, Meridian Pant, Infinity Bra, UA SPORTSMASK and in footwear, the HOVR Machina, Phantom 2 and the Breakthru. As a pinnacle expression of this effort, we launched the Curry 8 basketball shoe, the first product to feature UA Flow. At 2.2 billion of SG&A in 2020, our cost structure is not meant to support the 4.5 billion revenue that we realized last year, but instead, a larger top line business where we can begin to leverage some of the foundational investments necessary for our growth expectations. Therefore, our breakeven is somewhere around the 4.7 billion mark. With e-commerce up 40% in 2020 and representing nearly half of our total D2C business for the full year, we are hyper-focused on better understanding the consumer journey and building greater personalization capabilities to unlock even deeper connections with athletes. With that said, let's dive into our fourth-quarter results starting with revenue, which was down 3% to 1.4 billion compared to the prior year. From a channel perspective, our wholesale revenue was down 12%. Keep in mind, about 130 million in orders shifted out of the fourth quarter into the first quarter of 2021 due to timing impacts from COVID-19 related to customer order flow and changes in supply chain timing that we discussed on our last call. Our direct-to-consumer business increased 11% driven by 25% growth in our e-commerce business. Our licensing business was down 12% driven primarily by lapping one-time settlements in the prior year with two of our North American partners and lower minimum royalty payments. By product type, apparel revenue was down 4% driven by declines in our train and team sports categories. Footwear was down 7% mainly driven by declines in our team sports category. And finally, our accessories business was up 32%, with all of the growth being driven by SPORTSMASK. From a regional and segment perspective, fourth-quarter revenue in North America was down 6%, negatively impacted by the COVID-19 timing impacts, I previously mentioned, as well as reduced off-price sales. In EMEA, revenue was down 11%, also negatively impacted by COVID-19 timing impacts, partially offset by solid growth within our DTC business, primarily due to e-commerce. Revenue in Asia Pacific was up 26% driven by growth across all channels, partially offset by timing impacts from COVID-19. In Latin America, revenue was up 2% driven by DTC growth, which included strength in our e-commerce business, partially offset by impacts from COVID-19. And finally, our Connected Fitness business was down 5% due to the sale of the MyFitnessPal platform in the quarter, which was completed in mid-December. Fourth-quarter gross margin increased 210 basis points to 49.4%, including a 12 million impact related to restructuring efforts. Excluding restructuring charges, adjusted gross margin increased 300 basis points to 50.3% driven by approximately 150 basis points of positive channel mix benefiting from lower year-over-year distributor and off-price sales, which carry a lower gross margin and a heavier mix toward DTC, which included strong e-commerce growth. Additional year-over-year increases included 90 basis points of supply chain benefits primarily driven by product costing improvements and 30 basis points of positive regional mix driven by APAC growth in the quarter. SG&A expense decreased 4% to $586 million due to our restructuring efforts and tighter spend management. In the fourth quarter, we recorded 52 million of restructuring charges and certain impairments related to long-lived assets. As a reminder, we expect to incur total estimated pre-tax restructuring and related charges under this plan in the range of 550 to 600 million. For the full year, we realized 473 million in restructuring and related impairment charges and 141 million from impairments of long-lived assets and goodwill. Our fourth-quarter operating income was 56 million. Excluding restructuring and impairment charges, adjusted operating income was 120 million. After tax, we realized net income of 184 million or $0.40 of diluted earnings per share during the quarter. Excluding restructuring charges, as well as the noncash amortization of debt discount on our senior convertible notes and the gain in deal-related costs associated with the sale of MyFitnessPal, our adjusted net income was 55 million or $0.12 of adjusted diluted earnings per share for the quarter. From a balance sheet perspective, I am pleased to report we ended the fourth quarter with 1.5 billion in cash and cash equivalents, inclusive of 199 million related to the sale of MyFitnessPal. We also had no borrowings outstanding under our 1.1 billion revolver. And finally, inventory for the fourth quarter was 896 million, relatively unchanged compared to the prior year. Relative to revenue, we expect a high single-digit rate increase for the full year compared to 2020, reflecting a high single-digit increase in North America and a high-teens growth rate in our international business. Third, as previously discussed, we will begin to exit certain undifferentiated wholesale distribution, primarily in North America, starting in the back half of 2021 with a plan to close about 2,000 to 3,000 wholesale partner doors, thereby expecting to win closer to 10,000 doors by the end of 2022. For gross margin on a GAAP basis, we expect the full-year rate to be up slightly against our 2020 adjusted gross margin of 48.6%, with benefits from pricing and supply chain efficiency being largely offset by the sale of MyFitnessPal, which was a high gross margin business. With all of that considered, we expect reported operating income to reach approximately 5 to 25 million and adjusted operating income to be approximately 130 to 150 million, which will take us to a reported diluted loss per share of about $0.18 to $0.20 or adjusted diluted earnings per share in the range of $0.12 to $0.14. We are currently planning for first-quarter revenue to be up approximately 20%. This expectation includes about 130 million of orders that shifted out of the fourth quarter of 2020 into the first quarter of 2021 due to timing impacts from COVID-19 related to customer order flow and changes in supply chain timing that we discussed earlier. Next, we expect gross margin to be up about 180 to 200 basis points compared to the prior year driven primarily by pricing benefits related to lower promotions, primarily in DTC compared to the prior year, and continued supply chain benefits related to product costing improvements. Bringing this to the bottom line, we expect a first quarter operating loss of approximately 55 to 70 million. Excluding planned restructuring impacts, we expect adjusted operating income to be approximately 30 to 35 million. Excluding restructuring, we expect about $0.03 of adjusted diluted earnings per share.

With that said, let's dive into our fourth-quarter results starting with revenue, which was down 3% to 1.4 billion compared to the prior year. From a channel perspective, our wholesale revenue was down 12%. Fourth-quarter gross margin increased 210 basis points to 49.4%, including a 12 million impact related to restructuring efforts. After tax, we realized net income of 184 million or $0.40 of diluted earnings per share during the quarter. Excluding restructuring charges, as well as the noncash amortization of debt discount on our senior convertible notes and the gain in deal-related costs associated with the sale of MyFitnessPal, our adjusted net income was 55 million or $0.12 of adjusted diluted earnings per share for the quarter. And finally, inventory for the fourth quarter was 896 million, relatively unchanged compared to the prior year. Relative to revenue, we expect a high single-digit rate increase for the full year compared to 2020, reflecting a high single-digit increase in North America and a high-teens growth rate in our international business. With all of that considered, we expect reported operating income to reach approximately 5 to 25 million and adjusted operating income to be approximately 130 to 150 million, which will take us to a reported diluted loss per share of about $0.18 to $0.20 or adjusted diluted earnings per share in the range of $0.12 to $0.14.

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In the first quarter of 2021, we once again delivered results that significantly outperformed the industry, our chain scale segments and local competition, and we expanded our adjusted EBITDA margins to 69%. Our domestic systemwide year-over-year RevPAR change surpassed the industry by 23 percentage points, declining 4.4% and 18.7% as compared to the same quarters of both 2020 and 2019 respectively. These results have helped us increase RevPAR index versus our local competitors by over 6 percentage points in the first quarter as compared to 2019. For the first quarter we awarded nearly 90 new domestic franchise agreements and over 50% increase over the same period of 2020. Of the total new domestic agreements, over 80% were for conversion hotels. In fact, in April, we met with over 25 developers and toward the new model room for this exciting brand and interest is very high. And we remain focused on growing our strategic conversion brands specifically, Clarion Pointe, a relatively new brand extension to the Clarion brand has experienced a five-fold increase of its portfolio and the Ascend Hotel Collection has increased the number of its domestic rooms by over 25% since the end of 2019. We are also pleased to see that our first quarter experienced over 400 basis points weekday occupancy index share gains as compared to 2019. The acquisition of the WoodSpring Suites brand in 2018 and our strategic investments in the Extended Stay segment, allowed us to nearly quadruple the size of the portfolio over the past five years, with the segment now representing 10% of our total domestic rooms. In the first quarter the Extended Stay segment rapidly expanded by 44 units year-over-year from the first quarter of 2020 and now stands at nearly 455 domestic hotels with a domestic pipeline of 310 hotels. For the first quarter as compared to 2019, WoodSpring reported over 3% RevPAR growth, driven by a more than 4% increase in average daily rate and an average occupancy rate of 74%, a truly remarkable achievement. The brand's pipeline continues to expand year-over-year and reached nearly 150 domestic hotels at the end of March 2021. Our Suburban Extended Stay brand experienced 10% year-over-year domestic unit and pipeline growth. At the same time our MainStay Suites mid-scale extended stay brand captured over 13 percentage points in RevPAR index gains versus its local competitors as compared to 2019. The brand's portfolio expanded to over 90 domestic hotels open a 26% increase year-over-year. Our efforts to transform the brand are paying off, specifically the Comfort Family achieved RevPAR index gains versus its local competitors of nearly 10 percentage points and a RevPAR change that was nearly 11 percentage points more favorable than the upper mid-scale chain scale in the first quarter as compared to 2019. The Comfort brand family reached over 260 hotels in its domestic pipeline, over one quarter of which are hotels awaiting conversions, which we believe will fuel the brand's growth in the near term. And finally, Clarion Pointe, ended the first quarter by achieving a milestone of the 30th hotel opened in the United States and more than 20 additional hotels awaiting conversion in the near term. Our upscale portfolio achieved impressive year-over-year growth in the first quarter, where we increased our domestic upscale room count by 22% and marked the highest number of openings in a given quarter, matching the company's all-time record. The brand grew its domestic room count by nearly 26% year-over-year and expanded to nearly 380 hotels open around the globe. The brand outperformed the upscale segment RevPAR change by 19 percentage points. It achieved RevPAR index gains of 12 percentage points against its local competitors and it recorded average daily rate index gains of 11 percentage points. Our upscale Cambria Hotels brand continues its positive momentum, growing its portfolio size by 14% to 57 units with 18 projects under active construction at the end of March. Consumer confidence in Cambria Hotels drove the brand RevPAR share gains versus its local competitors to 16 percentage points in the first quarter as compared to 2019. In the first quarter, we further expanded our attractive upscale platform and successfully on-boarded 22 Penn National Gaming Casino resort properties, representing nearly 7,000 rooms joining our Ascend Hotel Collection. This strategic agreement will offer our more than 48 million Choice Privileges members the opportunity to earn and redeem points at these Penn properties by booking their stays directly on choicehotels.com. Taking a closer look at our results for the first quarter 2021, total revenues excluding marketing and reservation system fees were $91.4 million. Adjusted EBITDA totaled $63.1 million driven by improving RevPAR performance and our ability to realize adjusted SG&A savings of 20% and our adjusted EBITDA margin expanded to 69%, a 330 basis point increase year-over-year. As a result, our adjusted earnings per share were $0.57 for the first quarter. Our domestic systemwide RevPAR outperformed the overall industry by 23 percentage points for the first quarter, declining 18.7% from 2019, compared to 2020, our first quarter 2021 RevPAR declined only 4.4%. At the same time, our first quarter results exceeded the primary chain scale segments in which we compete as reported by STR, by over 8 percentage points versus 2019. In fact, starting in mid-March, we've experienced our highest occupancy levels since the start of the pandemic, with systemwide occupancy rates exceeding 70% on numerous days. Our April performance was significantly stronger with a RevPAR decline of approximately 4% and an occupancy rate increase of 80 basis points versus 2019 levels. Specifically when compared to first quarter 2019, our upscale portfolio increased its RevPAR index relative to its local competitive set by 14 percentage points. Our extended stay portfolio outperformed the industry's RevPAR change by an impressive 38 percentage points and grew versus its local competitive set by 10 percentage points. And finally the RevPAR change for our mid-scale and upper mid-scale portfolio exceeded these segments by 9 percentage points. In fact, we were able to increase our overall RevPAR index against local competitors by over 6 percentage points, notably through our franchisees' ability to maintain rate integrity. More specifically, our average daily rate improved from the prior quarter and our average daily rate index increased 3.7 percentage points as compared to 2019. At the same time, we continue to grow the overall size of our franchise system and open the highest number of hotels in any first quarter in the past 10 years. Across our more revenue intense brands in the upscale extended stay and mid-scale segments we observed stronger unit growth, increasing the number of hotels by 2.4% year-over-year and improving the growth from fourth quarter 2020. Furthermore, we expect the unit growth of the more revenue intense segments to accelerate versus 2021 and range between 2% and 3%. Specifically, we saw an increase in demand for our conversion brands with domestic conversion contracts up 76% year-over-year. The company's domestic effective royalty rate exceeded 5% for the first time ever in a quarter and increased 7 basis points year-over-year for the first quarter compared to the prior year. At the end of first quarter 2021, the company had approximately $823 million in cash and available borrowing capacity through its revolving credit facility, even though our cash generation tends to be weaker in the first quarter, due to the seasonality of our business and other cash outlays. While we are not providing formal guidance today, we currently expect RevPAR change for the remainder of the year to be stronger than first quarter 2021 results versus both 2020 and 2019.

As a result, our adjusted earnings per share were $0.57 for the first quarter. While we are not providing formal guidance today, we currently expect RevPAR change for the remainder of the year to be stronger than first quarter 2021 results versus both 2020 and 2019.

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In the fourth quarter, Capital One earned 2.4 billion or $5.41 per diluted common share. For the full year, Capital One earned 12.4 billion or $26.94 per share. On an adjusted basis, full year earnings per share were $27.11. Full year ROTCE was 28.4%. Included in the results for the fourth quarter was an upgrade to a legacy rewards program, which increased our rewards liability and decreased noninterest income by $92 million. Both period end and average loans held for investment grew 6% on a linked-quarter basis. Ending loans grew 10% in domestic card, 7% in commercial, and 1% in consumer banking. Revenue in the linked quarter increased 4%, driven by the loan growth I just described, while total noninterest expense increased 12% in the quarter, driven by increases in both operating and marketing expenses. Provision expense in the quarter was 381 million and net charge offs of 527 million were partially offset by a modest allowance release. For the total company, we released 145 million of allowance in the fourth quarter, bringing the total allowance balance to 11.4 billion. The total company coverage ratio now stands at 4.12%. In domestic card, the allowance balance remained flat at $8 billion. Turning to Page 6, I'll now discuss liquidity. You can see, our preliminary average liquidity coverage ratio during the fourth quarter was 139%. The LCR remains stable and continues to be well above the 100% regulatory requirement. Relative to the prior quarter, ending cash and equivalents were down about $5 billion. And investment securities were down about $3 billion as we used our liquidity to fund loan growth and share buybacks. Turning to Page 7, I'll cover our net interest margin. You can see that our fourth quarter net interest margin was 6.6%, 25 basis points higher than Q3 and 55 basis points higher than the year-ago quarter. Our common equity Tier 1 capital ratio was 13.1% at the end of the fourth quarter, down 70 basis points from the prior quarter. We continue to estimate that our CET1 capital need is around 11%. In the fourth quarter, we repurchased $2.6 billion of common stock, which completed our $7.5 billion board authorization. Our board of directors has approved an additional repurchase authorization of up to $5 billion of the company's common stock. Purchase volume for the fourth quarter was up 29% year over year and up 30% compared to the fourth quarter of 2019. The rebound in loan growth accelerated, with ending loan balances up $10.2 billion or about 10% year over year. Ending loans also grew 10% from the sequential quarter, ahead of typical seasonal growth of around 4%. And revenue was up 15% year over year, driven by the growth in purchase volume and loans. Domestic card revenue margin increased 123 basis points year over year to 18.1%. The domestic car charge-off rate for the quarter was 1.49%, a 120-basis-point improvement year over year. The 30-plus delinquency rate at quarter-end was 2.22%, 20 basis points better than the prior year. On a linked-quarter basis, the charge-off rate was up 13 basis points and the delinquency rate was up 29 basis points. Noninterest expense was up 24% from the fourth quarter of 2020. Total company marketing expense was $999 million in the quarter. Driven by auto, fourth quarter ending loans increased 13% year over year in the consumer banking business. Average loans also grew 13%. Fourth quarter auto originations were up 32% year over year. On a linked-quarter basis, auto originations were down 16%. Fourth quarter ending deposits in the consumer bank were up $6.6 billion or 3% year over year. Average deposits were up 2% year over year. Consumer banking revenue grew 7% from the prior-year quarter, driven by growth in auto loans, partially offset by declining auto loan yields. Noninterest expense increased 15% year over year. Fourth quarter provision for credit losses improved by $58 million year over year, driven by an allowance release in our auto business. On a linked-quarter basis, the charge-off rate for the fourth quarter was 0.58%, up 40 basis points; and the 30-plus delinquency rate was 4.32%, up 67 basis points. Fourth quarter ending loan balances were up 12% year over year, driven by growth in selected industry specialties. Average loans were up 8%. Ending deposits grew 13% from the fourth quarter of 2020 as middle market and government customers continued to hold elevated levels of liquidity. Quarterly average deposits also increased 14% year over year. Fourth quarter revenue was up 19% from the prior-year quarter, with 29% growth in noninterest income. Noninterest expense was up 17%. In the fourth quarter, the commercial banking annualized charge-off rate was a negative 2 basis points. The criticized performing loan rate was 6.1%, and the criticized nonperforming loan rate was 0.8%.

In the fourth quarter, Capital One earned 2.4 billion or $5.41 per diluted common share. Revenue in the linked quarter increased 4%, driven by the loan growth I just described, while total noninterest expense increased 12% in the quarter, driven by increases in both operating and marketing expenses. Provision expense in the quarter was 381 million and net charge offs of 527 million were partially offset by a modest allowance release. You can see that our fourth quarter net interest margin was 6.6%, 25 basis points higher than Q3 and 55 basis points higher than the year-ago quarter. Our common equity Tier 1 capital ratio was 13.1% at the end of the fourth quarter, down 70 basis points from the prior quarter.

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WMC's GAAP book value increased to 29.2% in the quarter to $4.07 per share. GAAP net income was $59.8 million or $0.98 per share and core earnings were $6.4 million or $0.10 per share in the quarter. Our net interest margin improved to 2.27%, which together with the underlying performance of the portfolio contributed to solid core earnings despite a significant reduction in recourse leverage from 3 times as of June 30 to 2.2 times as of September 30. In light of our results this quarter including the strengthening of our balance sheet, improved liquidity and solid core earnings, the Company declared a cash dividend of $0.05 in the quarter. The recovery and asset prices across the portfolio and the redemption of our dividend contributed to an economic return on book value of 30.8% for shareholders this quarter. Our non-QM residential loan portfolio is performing well and experienced a decline in the percentage of loans that were part of a forbearance plan dropping to 10% at September 30, from 16% at the end of the second quarter. The commercial whole loan portfolio carries an approximate 65% original LTV and all but one of the loans remains current. As we mentioned last quarter, the delinquent loan has a principal balance of $30 million which is secured by a hotel. Our large low non-Agency CMBS portfolio has an original LTV of 60% and despite exposures to some retail and hotel assets over 82% of the loans by principal balance remain current compared with 70% at June 30. In July, we retired $5 million of our convertible senior notes at a 25% discount to par value. In exchange for the issuance of $1.4 million shares of our common stock. Among other terms the amended facility has a 12-month term and bears interest at one month LIBOR plus 2.75%. We reported core earnings of $6.4 million or $0.10 per share for the third quarter. Our core earnings came in higher than the $4.3 million generated in the second quarter, primarily driven by a higher net interest margin and a full quarter's benefit of the lower financing costs associated with last quarter's Arroyo securitization, which allowed us to reduce the income drag experience under the original Residential hold on facility. Economic book value for the quarter increased 2.2% to $4.11 per share. This quarter the difference between our GAAP book value and our economic book value narrowed only $0.04 due to the sharp rebound in asset values, mainly in the residential whole loan portfolio, which reduce this accounting mismatch. Our Recourse leverage was 2.2 times at September 30, significantly lower than the 9.5 times level at the end of March and 5.4 times at the beginning of the year.

GAAP net income was $59.8 million or $0.98 per share and core earnings were $6.4 million or $0.10 per share in the quarter. In light of our results this quarter including the strengthening of our balance sheet, improved liquidity and solid core earnings, the Company declared a cash dividend of $0.05 in the quarter. We reported core earnings of $6.4 million or $0.10 per share for the third quarter.

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In my 35 years in real estate, I can't remember another year with as many positive and negative twist and turns in such a short period of time as we saw in 2020. We ended the year with same-store occupancy of 94.8%, an all-time year-end high for Extra Space. Our elevated occupancy has given us significant pricing power, which we have experienced since August and a return to positive same-store revenue growth in the fourth quarter of 2.3%, a 380 basis point acceleration from the third quarter. We also had excellent expense control with a 0.6% decrease in same-store expenses, resulting in 3.4% NOI growth in the quarter. Our return to positive NOI gains coupled with strong external investment activity yielded core FFO growth of 16.5% in the quarter. Despite the challenges of the year, the fourth quarter was full of accomplishments, including completion of two preferred equity investments totaling $350 million, $147 million in acquisitions, $168 million in bridge loan closings, the addition of 44 stores to our management platform, and receipt of NAREIT's Leader in the Light award, recognizing Extra Space for its sustainability efforts. We have already added 51 third-party management stores in 2021 and our acquisition, management and bridge loan pipelines are robust. We lowered expenses in all controllable expense categories in the quarter and despite property tax increases of 6.4%, we still delivered a reduction in same-store expenses overall. This resulted in same-store NOI growth of 3.4%. Core FFO for the quarter was $1.48, a year-over-year increase of 16.5% and well above consensus estimates. Our new same-store pool includes a total of 860 stores, which is essentially flat with last year. We anticipate the changes in the same-store pool will benefit our 2021 same-store revenue growth by approximately 20 basis points. Same-store revenue is expected to increase 4.25% to 5.5%, driven by higher occupancy in the first half of the year and elevated rates in new and existing -- to new and existing customers. Same-store expense growth is expected to be 3.5% to 4.5%, primarily driven by higher property tax expense. Our revenue and expense guidance results in same-store NOI growth range of 4.25% to 6.25%. Our guidance assumes $350 million in Extra Space investment, approximately $180 million of which is closed or under contract. We also expect to close approximately $400 million of bridge loans and plan to retain 20% to 25% of those balances or approximately $100 million in 2021. Our full year core FFO is estimated to be between $5.85 and $6.05 per share. We anticipate $0.16 of dilution from value-add acquisitions or C of O stores, down $0.04 from 2020.

We ended the year with same-store occupancy of 94.8%, an all-time year-end high for Extra Space. Core FFO for the quarter was $1.48, a year-over-year increase of 16.5% and well above consensus estimates.

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Let me also remind you that CVR Partners completed a 1-for-10 reverse split of its common units on November 23, 2020. We successfully completed $1 billion notes offering in January of 2020, which have provided us with additional cash and liquidity at attractive rates. We achieved significant reductions in SG&A operating costs, capital expenditures companywide, exceeding our goal of $50 million annual reduction in SG&A and operating expenses. Record ammonia production of 852,000 tons between the two plants, posting a combined utilization of 95% for the year. We reported a net loss of $320 million and a loss of $2.54 per share. For the fourth quarter, we reported a net loss of $78 million and loss per share of $0.67. EBITDA for the year was a negative $7 million and for the quarter was a positive $1 million. For the Petroleum segment, the combined total throughput for the fourth quarter of 2020 was approximately 219,000 barrels per day as compared to 213,000 barrels per day for the fourth quarter of 2019. Group 3 2-1-1 crack spreads averaged $8.44 per barrel in the fourth quarter of 2020. However, RINs consumed 40% of that at approximately $3.50 per barrel. The Group 3 2-1-1 averaged $16.65 per barrel in the fourth quarter of 2019, when RINs were only a $1.15 per barrel. The Brent TI differential averaged $2.49 per barrel in the fourth quarter compared to $5.55 in the prior year period. The Midland Cushing differential was $0.37 over WTI in the quarter compared to $0.94 over WTI in the fourth quarter of 2019. And the WCS to WTI crude differential was a low $11.44 per barrel compared to $18.89 per barrel in the same period last year. Light product yield for the quarter was 103% on crude oil processed. Our distillate yield as a percentage of total crude oil throughputs was 44% in the fourth quarter of 2020 consistent with prior year period. In total, we gathered approximately 117,000 barrels per day during the fourth quarter of 2020 as compared to 148,000 barrels per day for the same period last year. Our current gathering volumes are approximately 130,000 barrels per day, including the volumes on the pipelines we have recently acquired from Blueknight. In the Fertilizer segment, we had a strong ammonia utilization at both of our facilities during the quarter, at 99% at Coffeyville and 103% at East Dubuque. Our consolidated fourth quarter net loss of $78 million and loss per diluted share of $0.67 includes a mark-to-market gain of $54 million related to our Delek investment, and favorable inventory valuation impacts of $15 million. Excluding these impacts, our fourth quarter 2020 loss per diluted share would have been approximately $1.18. The effective tax rate for the fourth quarter of 2020 was 23% compared to 40% for the prior year period. As a result of our net loss for the full year 2020 and in accordance with the NOL carry-back provisions of the CARES Act, we currently anticipate an income tax refund of $35 million to $40 million. The Petroleum segment's EBITDA for the fourth quarter of 2020 was a negative $66 million compared to a positive $135 million in the same period in 2019. Excluding inventory valuation impacts of $15 million, our Petroleum Segment EBITDA would have been a negative $81 million. In the fourth quarter of 2020, our Petroleum segment's refining margin, excluding inventory valuation impact was $0.56 per total throughput barrel compared to $11.86 in the same period in 2019. The increase in crude oil and refined product prices through the quarter generated a positive inventory valuation impact of $0.76 per barrel during the fourth quarter of 2020. This compares to a $0.61 per barrel positive impact during the same period last year. Excluding inventory valuation impact and unrealized derivative losses, the capture rate for the fourth quarter of 2020 was approximately 20% compared to 79% in the prior year period. The most significant item impacting our capture rate for the quarter was elevated RINs prices, which reduced margin capture by approximately 71%. Derivative losses for the fourth quarter of 2020 totaled $15 million, including unrealized losses of $23 million associated with Canadian crude oil and crack spread derivative. In the fourth quarter of 2019, we had derivative losses of $19 million, which included unrealized losses of $24 million. RINs expense in the fourth quarter of 2020 was $120 million or $5.97 per barrel of total throughput, compared to $13 million for the same period last year. Our fourth quarter RINs expense was impacted by $64 million from this mark-to-market impact on our accrued RFS obligation, which was mark-to-market at an average RIN price of $0.89 at year end and other market activities. The full year 2020 RINs expense was $190 million as compared to $43 million in 2019. For 2021, we forecast a net obligation from refining operations of approximately $280 million RINs adjusted for our expected internal blending volumes. We also expect to generate approximately $90 million D4 RINS from renewable diesel in the second half of the year, bringing our net RIN obligation for 2021 to approximately $190 million RINs. RINs expense for 2021 is expected to be comprised of the cost of this anticipated $190 million RIN obligation, as well as any necessary mark-to-market on any remaining accrued RFS obligation. Subsequent to year end, we have reduced our 2020 RINs obligation by approximately 8%. The Petroleum segment's direct operating expenses were $3.99 per barrel of total throughput in the fourth quarter of 2020 as compared to $4.63 per barrel in the fourth quarter of 2019. For the full year 2020, we reduced operating expenses and SG&A costs in the Petroleum segment by approximately $62 million compared to the full year of 2019. For the fourth quarter of 2020, the Fertilizer segment reported operating loss of $1 million and a net loss of $17 million, or $1.53 per common unit, and EBITDA of $18 million. This is compared to a fourth quarter 2019 operating loss of $9 million, a net loss of $25 million, or $2.20 per common unit, and EBITDA of $11 million. For the full year 2020, we reduced operating expenses and SG&A costs in the Fertilizer segment by over $23 million compared to the full year of 2019. During the quarter, CVR Partners completed a 1-for-10 reverse split and repurchased nearly 394,000 of its common units for approximately $5 million. In total, CVR Partners repurchased over 623,000 of its common units for $7 million in 2020, and the Board of Directors of CVR Partners' general partner has approved an additional $10 million unit repurchase authorization. Total units outstanding at the end of 2020 were 10.7 million, of which CVR Energy owns approximately 36%. The total consolidated capital spending for the full year of 2020 was $121 million, which included $90 million from the Petroleum segment, $16 million from the Fertilizer segment and $12 million for the Renewable Diesel Project at Wynnewood. Of this total, environmental and maintenance capital spending comprised $92 million, including $77 million in the Petroleum segment and $12 million in the Fertilizer segment. We estimate the total consolidated capital spending for 2021 to be $215 million to $230 million, of which $115 million to $125 million is expected to be environmental and maintenance capital and $95 million to $100 million is related to the Renewable Diesel Project. Our consolidated capital spending plan excludes planned turnaround spending, which we estimate will be approximately $11 million for the year in preparation of the planned turnaround at Wynnewood and Coffeyville in 2022. Cash provided by operations for the fourth quarter of 2020 was $28 million and free cash flow in the quarter was $4 million. Working capital was a source of approximately $105 million in the quarter due primarily to an increase in our accrued RFS obligation. For the year, cash from operations was $90 million and free cash flow was a use of $193 million. In addition, in January 2020, we refinanced and upsized our notes, which generated a net $489 million of cash. Turning to the balance sheet, we ended the year with approximately $667 million of cash, a slight increase from the prior year. Our consolidated cash balance includes $31 million in the Fertilizer segment. As of December 31st, excluding CVR Partners, we had approximately $929 million of liquidity, which was comprised of approximately $637 million of cash, securities available for sale of $173 million, and availability under the ADL of approximately $365 million, less cash included in the borrowing base of $246 million. Looking ahead to the first quarter of 2021, our Petroleum segment -- for our Petroleum segment, we estimate total throughput to be approximately 185,000 -- excuse me, to 190,000 barrels per day. We expect total direct operating expenses for the first quarter to be $95 million to $105 million and total capital spending to range between $65 million and $75 million. For the Fertilizer segment, despite reducing operating rates that used to be last week due to the extreme weather conditions and natural gas pricing, we estimate our ammonia utilization rate to be greater than 90% for the quarter. We expect direct operating expenses to be $35 million to $40 million excluding inventory impacts and total capital spending to be between $4 million and $7 million. Starting with crude oil, we've drawn down about 50% of the excess crude oil inventories worldwide. Moving on to refined products, gasoline demand is down approximately 1 million barrels per day and vehicle miles traveled are showing declines. RINs are ridiculous, approaching $5 per barrel, putting RINs cost above operating costs. Diesel cracks are in contango, and the domestic refining utilization is still low at 83%. We believe cracks will remain relatively weak until demand supports utilization in the 90% plus level. Today, we have seen approximately 5 million barrels per day and announced between permanent shutdowns, temporary idling and potential closures worldwide, with $1.1 million of that in the United States. Our primary focus now is on getting Phase 1 mechanically complete. Corn prices have rallied over 50% since October, significantly improving farmer economics and driving demand for crop inputs higher. Looking at the first quarter of 2021, quarter-to-date metrics are as follows: Group 3 2-1 [Phonetic] Group 3 2-1-1 cracks have averaged $12.77 per barrel, with the Brent TI spread of $3.11 per barrel, and the Midland Cushing differential was $1.5 over WTI. WTL differential has averaged $0.71 per barrel over WTI. And the WCS differential has averaged $12.60 per barrel under WTI. Ammonia prices have increased to over $400 a ton, while UAN prices are $250 dollars per ton. Renewable diesel margins have averaged $1.31 per gallon, quarter-to-date, based on soybean oil with the carbon intensity of 60, and includes RINs, blenders tax credit, and low carbon fuel standard credit. As of yesterday, Group 3 2-1-1 cracks were $17.77 per barrel. Brent TI was $3.67 and WCS was $12.85 under WTI. Quarter-to-date, ethanol RINs have averaged toward $0.94 and biodiesel RINs have averaged $1.5. In January of 2020, ethanol RINs averaged $0.16 and biodiesel RINs averaged $0.40, a nearly six-fold increase in the price of ethanol RINs in one year should be clear evidence as the RFS program is broken. Without the mark-to-market effect of this position, our capture rate would have been higher by 38% for the quarter.

For the fourth quarter, we reported a net loss of $78 million and loss per share of $0.67. Our consolidated fourth quarter net loss of $78 million and loss per diluted share of $0.67 includes a mark-to-market gain of $54 million related to our Delek investment, and favorable inventory valuation impacts of $15 million. Today, we have seen approximately 5 million barrels per day and announced between permanent shutdowns, temporary idling and potential closures worldwide, with $1.1 million of that in the United States.

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As we announced earlier today, we had a segment operating margin rate of 11.9% in the third quarter, and year to date, an exceptional segment operating margin rate of 12%. In addition, earnings per share in the quarter were $6.63, an increase of 13% compared to last year. And our transaction-adjusted free cash generation continues to be strong, increasing 15% year to date. We ended the quarter with just over $4 billion in cash, providing significant flexibility in support of our capital deployment initiatives. With respect to the top line, our year-to-date organic growth was 8%. During the third quarter, this included employee leave-taking at a higher level than planned, a tighter labor market, and certain supply chain challenges. Based on the team's strong third-quarter performance and in consideration of macroeconomic factors as we see them today, we are increasing our guidance for segment OM and earnings per share for the year and narrowing our sales guidance to approximately $36 billion. And in the third quarter, after just 28 months in engineering, manufacturing, and development, we achieved a critical milestone, clearing the wafer production. Northrop Grumman supplies the scramjet propulsion system for HAWC, allowing speeds of greater than Mach 5. For the bomber, the B-21 program continues to advance. The GBSD program has ramped significantly this year, and we now expect that it will add just over $1 billion in incremental revenue to our 2021 results and another approximately $500 million of incremental revenue in 2022. For both B-21 and GBSD, we have applied digital transformation concept as a key enabler to reduce risk, increase productivity, shorten cycle time, and improve the system's ability to adapt to changing threats. To this end, during the third quarter, our next-generation electronic warfare system, which will equip domestic F-16, had its first test flight on a testbed aircraft at the Northern Lightning exercise. We anticipate an EMD contract for next-generation electronic warfare in 2022 with an overall lifetime opportunity of up to $3 billion. And consistent with increased demand in this area, we received $1.2 billion in restricted space awards in the third quarter. We continued to return cash to shareholders through our buyback program and quarterly dividend, returning over $800 million in the quarter. Slide 4 provides a bridge between third-quarter 2020 and third-quarter 2021 sales, excluding sales from the IT services divestiture, our organic growth was 3%. Compared to the third quarter of 2020, our earnings per share increased 13% to $6.63. Strong segment operational performance contributed about $0.14 of growth and lower corporate unallocated added another $0.55. This included a $60 million benefit from insurance settlements related to shareholder litigation involving the former Orbital ATK business prior to our acquisition. Pension costs contributed $0.17 of growth, driven by higher non-service FAS income. Our marketable securities performance represented a headwind of $0.17 compared to the third quarter of 2020, which benefited from particularly strong equity markets. Aeronautics sales declined 6% for the quarter. Year to date, its sales are down 1%. This quarter, we experienced slightly lower volume across the portfolio, including restricted efforts, F-35, B-2 DMS, and Global Hawk programs. At Defense Systems, sales decreased by 24% in the quarter and 22% year to date. On an organic basis, sales were down roughly 2% in the quarter and year-to-date periods driven by the completion of our activities on the Lake City small-caliber ammunition contract last year. Lake City represented a sales headwind of roughly $75 million in the quarter and $335 million year to date. Mission Systems sales were down 5% in the quarter and up 4% year to date. Organically, MS sales increased 1% in Q3, and year to date, they are up a robust 9%. And finally, Space Systems continued to deliver outstanding sales growth, increasing 22% in the third quarter and 28% year to date. We delivered another quarter of excellent performance with segment operating margin rate at 11.9%. Aeronautics third-quarter operating income decreased to 10% due to lower sales volume and a $42 million unfavorable EAC adjustment on the F-35 program. The AS operating margin rate decreased to 9.7% in Q3 as a result of this adjustment with year-to-date operating margin slightly ahead of last year at 10.1%. The Defense Systems operating income decreased by 19% in the quarter and 16% year to date largely due to the impact of the IT services divestiture. Operating margin rate increased to 12.4% in the quarter and 12% year to date, largely driven by improved performance and contract mix in Battle Management and Missile Systems, partially offset by lower net favorable EAC adjustments. At Mission Systems, operating income was relatively flat in the quarter and up 10% year to date. Third-quarter operating margin rate improved to 15.3% and year to date was 15.5%, reflecting strong program performance and changes in business mix as a result of the IT services divestiture. Space Systems operating income rose 29% in the quarter and 36% year to date, driven by higher sales volume. Operating margin rate was also higher at 10.7% in the quarter and 10.9% year to date, driven by higher net favorable EAC adjustments. In Q4 of 2020, the IT services business contributed almost $600 million of sales, and the equipment sale at AS generated over $400 million. Q4 of 2021 also has four fewer working days than the same period in 2020, representing a headwind of about 6%. Adjusting for these three items, our Q4 2021 sales would grow at 3% to 4% based on our latest full-year guidance. Based on what we now see, we expect sales of approximately $36 billion. Our segment operating margin rate guidance is 10 basis points higher at 11.7% to 11.9%, reflecting our continued strong performance. Our net FAS/CAS pension adjustment has increased $60 million for the full year as a result of the annual demographic update we performed in Q3. Other corporate unallocated costs are $70 million below our previous guidance, now at approximately $120 million for the year. As I mentioned, our corporate unallocated costs benefited from a $60 million insurance settlement in Q3, as well as additional benefits from state taxes. These updates translate into an increase of 50 basis points in our operating margin rate to a range of 16% to 16.2% in our updated guidance. Remember that the gain from the IT services divestiture in Q1 contributed approximately 5 percentage points of overall operating margin benefit for the full year. We continue to project the 2021 effective federal tax rate in the high 17% range, excluding the effects of the divestiture, which is consistent with our prior guidance. Segment performance is contributing about $0.15 of the increase with the benefits to corporate unallocated and pension contributing the remainder. In total, this represents an $0.80 improvement in our transaction-adjusted earnings per share guidance. With this latest increase, our 2021 earnings per share guidance is up by about $2 since our initial guidance in the beginning of the year. Year to date, we've generated over $2.1 billion of transaction-adjusted free cash flow, up 15% compared to 2020, and we ended the quarter with over $4 billion in cash on the balance sheet. Keep in mind that we have a roughly $200 million payroll tax payment in Q4 from the Cares Act legislation with the second similar payment in 2022. Our healthy cash position has enabled us to repurchase over $2.7 billion of stock so far this year, on track with our full-year target of $3 billion or more. We expect Space to be our fastest-growing segment again in 2022, driven by GBSD, NGI, and several restricted efforts as they continue to ramp. Regarding Aeronautics Systems, after several years of strong growth, our latest 2021 sales guidance calls for a mid-single-digit decline, and we see that trend continuing in 2022. We're also projecting lower sales on JSTARS, F-18, as well as our restricted portfolio. Altogether, we currently expect 2022 sales at the company level to reflect continued organic growth. Looking at segment margin, we expect the strong results we've demonstrated in 2021 to continue in 2022 with excellent program performance offsetting a portion of the 20 to 30 basis point benefit we generated from pension-related overhead rate changes in Q1 of 2021. Lower CAS pension recoveries and higher corporate unallocated expenses are currently projected to create an earnings per share headwind next year of more than $2. As you can see on Slide 13, our CAS recoveries are currently expected to be lower by $350 million next year. In addition, as we've noted in the past, current tax law would require companies to amortize R&D costs over five years, starting in 2022, which would increase our cash taxes by around $1 billion next year and smaller amounts in subsequent years.

In addition, earnings per share in the quarter were $6.63, an increase of 13% compared to last year. During the third quarter, this included employee leave-taking at a higher level than planned, a tighter labor market, and certain supply chain challenges. We anticipate an EMD contract for next-generation electronic warfare in 2022 with an overall lifetime opportunity of up to $3 billion. Slide 4 provides a bridge between third-quarter 2020 and third-quarter 2021 sales, excluding sales from the IT services divestiture, our organic growth was 3%. Compared to the third quarter of 2020, our earnings per share increased 13% to $6.63. Aeronautics sales declined 6% for the quarter. At Defense Systems, sales decreased by 24% in the quarter and 22% year to date. Aeronautics third-quarter operating income decreased to 10% due to lower sales volume and a $42 million unfavorable EAC adjustment on the F-35 program. Adjusting for these three items, our Q4 2021 sales would grow at 3% to 4% based on our latest full-year guidance. Based on what we now see, we expect sales of approximately $36 billion. Our healthy cash position has enabled us to repurchase over $2.7 billion of stock so far this year, on track with our full-year target of $3 billion or more. We expect Space to be our fastest-growing segment again in 2022, driven by GBSD, NGI, and several restricted efforts as they continue to ramp. Regarding Aeronautics Systems, after several years of strong growth, our latest 2021 sales guidance calls for a mid-single-digit decline, and we see that trend continuing in 2022. Altogether, we currently expect 2022 sales at the company level to reflect continued organic growth. As you can see on Slide 13, our CAS recoveries are currently expected to be lower by $350 million next year.

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In fact, our strong performance to date gives us the confidence to increase guidance for our beer business as we now expect to achieve 9 to 11% net sales growth and 4 to 6% operating income growth for fiscal '22. Since then, we've made significant progress in reducing debt and achieving our goal of returning 5 billion in value to shareholders by the end of fiscal year '23 through a combination of dividends and share repurchases. In fact, to date, this fiscal year, we have repurchased 1.4 billion of our shares. And when combined with our dividend, we have achieved nearly 60% of our 5 billion goal. During the quarter, the Modelo brand family posted depletion growth of 17% for the quarter and single-handedly drove total import share gains in IRI channels on a dollar basis. 2 beer brand in dollar sales in the entire U.S. beer category, Modelo Especial is the only major beer brand growing household penetration and is leading the way as the No. 1 share gainer among high-end brands. 2 brand family in the Chelada space, posting depletion growth of more than 50% and for the second quarter. 1 loved brand in the import category, driven by a return to growth in the on-premise, which currently represents approximately 11% of our beer business volume. This business continues to drive growth from recently launched innovations, including Meiomi cabernet sauvignon, Kim Crawford Illuminate, the Prisoner cabernet, and chardonnay, all of which are among the top 10 innovations across high-end wine in IRI channels during the quarter. For example, Constellation's fine wine share has expanded significantly in the latest 12 weeks due to the robust growth of the Prisoner on Instacart and Robert Mondavi Winery on wine.com. In fact, e-commerce and DTC sales are up nearly three to four times versus 2019, and they comprise roughly 3 to 5% of our business versus 1% pre pandemic. harvest, which is about 70% complete at this point, while our production facilities, wineries, and tasting rooms remain untouched by recent wildfire activity. The nonalcoholic segment of total beverage alcohol grew almost 40% in 2020 in dollar sales through IRI channels. And according to IWSR research, 60% of consumers are switching between nonalcoholic or low alcoholic and full-strength drinks within the same occasion. The overall U.S. mezcal category grew 14% in 2020 according to IWSR, and super premium mezcal priced above $30 per barrel is projected to be the largest and fastest-growing segment within the category. More than 90% of Americans are in favor of cannabis legislation for medical purposes and two-thirds of those are in favor of legalizing for recreational use as well. In fact, nearly two out of three Americans already have legal cannabis access as 37 states have legalized for medical use and 18 states for adult use. Canopy's U.S. business grew 91% year over year in their most recent quarter, driven by robust consumer demand for their CBD and CPG products, including Martha Stewart-branded products, quatro beverages, stores and vape products, and BioSteel's new RTDs. 1 share gainer in the beer category, Modelo Especial, which we feel has ample runway for growth well into the future, given the steadily increasing household penetration rates among non-Hispanic consumers and continued strong velocity. We remain committed to our goal of returning 5 billion in value to shareholders by the end of fiscal year '23 through a combination of dividends and share repurchases. And through September, we've repurchased 6.2 million shares of common stock for $1.4 billion. As a result, we've increased our full-year fiscal 2022 comparable basis diluted earnings per share target, and we now expect to be in the range of $10.15 to $10.45. Net sales increased 14%, driven by shipment volume growth of nearly 12% and favorable price partially offset by unfavorable mix. Depletion volume growth for the quarter came in above 7%, driven by the continued strength of Modelo Especial and Corona Extra, as well as the continued return to growth in the on-premise channel. As Bill mentioned, on-premise volume accounted for approximately 11% of the total beer depletions during the quarter and grew strong double digits versus last year. As a reminder, the on-premise accounted for approximately 15% of our beer depletion volume pre COVID and accounted for only 6% of our depletion volume in Q2 fiscal 2021 as a result of the on-premise shutdowns and restrictions due to COVID-19. Beer operating margin decreased 530 basis points versus prior year to 37.2%. The increase in COGS was driven by several headwinds that include the following: First, a Q2 obsolescence charge of $66 million. Third, a step-up in depreciation expense, largely due to the incremental 5 million hectoliters at Obregon. Marketing as a percent of net sales increased 150 basis points to 9.9 versus prior year as we returned to our typical spending cadence, which is weighted more heavily toward the first half of the fiscal year. Lastly, the increase in SG&A was primarily driven by an increase of approximately $12 million in legal expenses, as well as higher compensation and benefits. We are now targeting net sales growth of 9 to 11%, reflecting the strength of our core beer portfolio and pricing actions that are higher than initially planned. Furthermore, we are now targeting operating income growth of 4 to 6%, which implies operating margin in the low to midpoint of our stated 39 to 40% range. As such, we are now estimating total beer depreciation expense to approximately $250 million, an increase of approximately $55 million versus last year, or a $10 million decrease versus our original planned estimate. Conversely, due to the slowdown in the hard seltzer sector, excess inventory resulted in a fiscal year-to-date obsolescence charge of approximately $80 million. From a marketing perspective, we continue to expect full-year spend as a percentage of net sales to land in the 9 to 10% range, which is in line with fiscal 2021 spend of 9.7% of net sales. I'd like to remind everyone of the difficult buying overlaps we will encounter as we're facing a 28% and 12% growth comparison for shipment volume and depletion volume, respectively. Q2 fiscal 2022 net sales declined 18% on shipment volume down 36%. Excluding the impact of the wine and spirits divestitures, organic net sales increased 15%, driven by organic shipment volume growth of nearly 6%, favorable mix and price and smoke-tainted bulk wine sales. Depletion volume declined 2% during the quarter and was additionally impacted by the challenging overlap the consumer pantry loading behavior especially for our mainstream brands that experienced robust growth during the beginning of the COVID-19 pandemic. Operating margin decreased 620 basis points to 19.7% as mix benefits from the existing portfolio and divestitures combined with favorable price were more than offset by increased marketing and SG&A spend, higher COGS, and margin-dilutive smoke-tainted bulk wine sales. For full-year fiscal 2022, the wine and spirits business continues to expect net sales and operating income to decline 22 to 24% and 23 to 25%, respectively. This implies operating margin to approximately 24%, which is flattish to prior year on a reported basis, which shows significant margin expansion on an organic basis. Excluding the impact of the wine experience divestitures, organic net sales is expected to grow in the 2 to 4% range. From a Q3 perspective, keep in mind that we are lapping unfavorable fixed cost absorption of $20 million in the prior year resulting from decreased production levels as a result of the 2020 U.S. wildfires. Fiscal year-to-date corporate expenses came in at approximately $117 million, up 7% versus last fiscal year. We now expect full-year corporate expenses to approximate $245 million, driven by increase in compensation and benefits. Comparable basis interest expense for the quarter decreased 4% to approximately 96 million versus prior year primarily due to lower average borrowings. We now expect fiscal 2022 interest expense to be in the range of 355 to $365 million. The slight decrease versus our previous guidance reflects early redemption of higher interest rate debt, as well as $1 billion of senior notes issued in July at attractive rates. Our Q2 comparable basis effective tax rate, excluding Canopy equity earnings, came in at 21.8% versus 16.9% in Q2 of last year, primarily driven by the timing of stock-based compensation benefits and a higher effective tax rate on our foreign businesses. We now expect our full-year fiscal 2022 comparable tax rate, excluding Canopy equity and earnings, to approximate 20% versus our previous guidance of 19%. As a result, we expect our Q3 tax rate to be higher than our full-year estimate at approximately 21%. We also now expect our 2022 weighted average diluted shares outstanding to approximate 192 million, reflecting the impact of our September year-to-date share repurchases previously discussed. We generated free cash flow of $1.2 billion for the first half of fiscal 2022, which is flat to prior year, reflecting strong operating cash flows offset by an increase in capex. Capex totaled $353 million, which included approximately $295 million of beer capex, primarily driven by expansion initiatives at our Mexico facilities. Our full-year capex guidance of 1 to 1.1 billion, which includes approximately 900 million targeted for Mexican beer operation expansions, remains unchanged. Furthermore, we continue to expect fiscal 2022 free cash flow to be in the range of 1.4 to $1.5 billion. This reflects operating cash flow in the range of 2.4 to $2.6 billion and the capex spend previously outlined.

In fact, our strong performance to date gives us the confidence to increase guidance for our beer business as we now expect to achieve 9 to 11% net sales growth and 4 to 6% operating income growth for fiscal '22. In fact, e-commerce and DTC sales are up nearly three to four times versus 2019, and they comprise roughly 3 to 5% of our business versus 1% pre pandemic. As a result, we've increased our full-year fiscal 2022 comparable basis diluted earnings per share target, and we now expect to be in the range of $10.15 to $10.45. For full-year fiscal 2022, the wine and spirits business continues to expect net sales and operating income to decline 22 to 24% and 23 to 25%, respectively. Excluding the impact of the wine experience divestitures, organic net sales is expected to grow in the 2 to 4% range. Furthermore, we continue to expect fiscal 2022 free cash flow to be in the range of 1.4 to $1.5 billion.

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The vaccination rates for the company as a whole currently track at 64% globally with 61% in North America and 81% across our international locations. Overseas, Denmark lifted its COVID restrictions throughout the country now that more than 75% of its population is fully vaccinated. In Australia, lockdowns are being lifted as vaccination rates there have exceeded 60%. On slide eight, consolidated sales for the quarter were $425 million, which was a decrease from sales of $438 million in the prior year quarter. Sales for RUPS were $187 million, down from $191 million. PC sales fell to $115 million from $148 million, and CM&C sales rose to $123 million, up from $99 million. Adjusted EBITDA for the quarter was $54 million or 12.7%, down from $67 million or 15.2% in the prior year. Also compared to the prior year, adjusted EBITDA for RUPS was $11 million, down from $19 million. PC EBITDA decreased to $20 million, down from $32 million, and CM&C EBITDA improved to $23 million, up from $17 million. On slide 10, sales for RUPS were $187 million, a slight decrease from the prior year's results. In fact, crosstie procurement is down 38% in the quarter over last year, while crosstie treatment has increased slightly by 3%. On slide 11, adjusted EBITDA for RUPS was $11 million compared with $19 million in the prior year. We saw reduced track time due to increased levels of rail traffic, along with inefficiencies caused by employee turnover, which led to an approximately $2 million decrease in EBITDA for our Maintenance-of-Way business. Additionally, the costs incurred by converting from Penta to our CCA preservatives had a negative $2 million unfavorable impact. PC achieved sales of $115 million compared to $148 million in the prior year. On slide 13, adjusted EBITDA for PC was $20 million compared with $32 million in the prior year. EBITDA from Europe and Australia was about $3 million lower due to European regulatory impacts on our product portfolio and rolling lockdowns in Australia and New Zealand. Slide 14 shows CM&C sales at $200 -- $123 million compared to sales of $99 million in the prior year. Adjusted EBITDA for CM&C was $23 million compared to $17 million in the prior year. Compared with the second quarter, prices of major products this quarter increased 11%, while average coal tar cost increased 8%. Compared with the prior year quarter, average pricing of major products rose 24%, while average coal tar costs went up by 39% in that particular quarter. As seen on slide 17, at the end of September, we had $762 million of net debt with $326 million in available liquidity, and we also remain in compliance with all of our debt covenants. Our net leverage ratio was 3.4 times at the end of September, down from 3.5 times at the end of December 2020 and 3.8 times in the prior year quarter. In connection with our ongoing efforts to evaluate potential financing options, we are reviewing various refinancing alternatives for both our $500 million senior notes, which are due in 2025, as well as our existing bank credit facility. On slide 19, you can see the remarkable accomplishment achieved by our entire Koppers Wood Products team at Longford, Australia, who have reached a 100% vaccination rate, our first location of 20 or more employees to reach that milestone, which is an incredible feat, and we are extremely appreciative of this achievement. The 93 employees there have achieved a 95% vaccination rates which are passing even the national rate of 75%. And finally, in our corporate headquarters in Pittsburgh, where we have 177 employees, we have crossed the 90% vaccination threshold. At our annual Zero Harm Truck Driving Championship 10 drivers were identified as finals for their overall performance and were appropriately recognized. The fourth quarter looks to generate a sales volume improvement of about 8% over third quarter results, building on North American residential demand that began in the back half of October. Year-over-year sales volumes are expected to finish about 14% lower than the record volumes in the prior year, which were driven by the strong demand during the pandemic in 2020. Industrial demand in the U.S. should remain strong at a 5% year-over-year increase through September as the pent-up preservative is phased out for utility pole treatment. So we will need to continue the acceleration of global price increases that began in early 2021 and that have totaled $15 million thus far through September. Looking at the external data, some encouraging news came from a 7% rise in the sale of Existing-home with all four U.S. regions experiencing increases in sales and housing demand, according to the National Association of Realtors. In October, the consumer confidence index was 114%, an increased from September and reversing a three month decline as concerns began to lessen regarding the spread of the Delta variant of the coronavirus. Now to keep up with rising costs, we are continuing to implement price increases that should add more than $20 million in 2022 and more than $60 million in 2023 based on current copper prices. From an R&D standpoint, we are pleased to report that we have been issued a patent for our next-generation MicroPro product, which will remain in force through early 2038, and we will begin commercializing it in 2023. As support for next year's volumes projection, is a leading indicator of Remodeling Activity estimates that spending on home renovation and repairs will reach 9% annual growth and surpassed $400 billion by the third quarter of 2022. Year-to-date through September, those increases have totaled $8 million, and we will need to continue to cover the rising cost of labor, chemical, fuel and transportation. Now as mentioned earlier, sales of CCA treated poles will increase as 65% of our UIP customers have selected CCA as their preservative of choice with 10% still undecided. In 2022, we expect to implement $15 million to $20 million in annualized price increases to cover the increased costs we are experiencing and that I had outlined earlier. At our current pace of 4.4 million ties purchased, this would represent a new low driven by customer reluctance to pay higher prices to meet their demand levels. As announced in early October, we closed on the sale of the property where our former Denver facility was located, providing net proceeds of $24 million in the fourth quarter. The American Association Railroads reports total year-over-year U.S. carload traffic increased 8%. Intermodal units increased 10% and combined carloads and intermodal units increased by 9% as of September 30. We expect a minimum of $20 million in price increases to flow through our top-line next year to account for higher material costs that we have been experiencing thus far this year. While overall volumes are set to increase 3% to 4% in 2022, with share remaining flat, volumes are expected to grow by more than 10% in 2023. Our yield optimization project would further improve pitch yields that we get from tar from 50% of production to up to 70%, meaning higher sales and profitability. On slide 32, our sales forecast for 2021 has been revised to be approximately $1.7 billion compared with $1.67 billion in the prior year to reflect the lower than previously expected PC volumes on our third and fourth quarter. On slide 33, we are adjusting our 2021 EBITDA projections to now be approximately $220 million, which is at the low end of our previously communicated range. That compares favorably with the $211 million generated in the prior year and will be our seventh consecutive year of EBITDA growth looking at the company in its current formation. On slide 34, our adjusted earnings per share guidance is now expected to be approximately $4.12, which is comparable to our all-time high 2020 adjusted earnings per share despite the negative impact of $0.40 per share from our higher estimated effective tax rate. Our $4.12 estimate for 2021 is lower than our prior estimate range, primarily due to our effective tax rate increasing from prior projections. Finally, on slide 35, our capital expenditures were $87.6 million year-to-date through September 30 or $78.7 million, net of the $8.9 million in cash proceeds. We are on track to spend a net amount of $80 million to $85 million on capital expenditures with approximately $45 million dedicated to growth and productivity projects. And through a combination of significant price actions and continued execution on our high-return internal projects, I am confident that we will take the next important step forward in 2022 toward meeting our 2025 goal of reaching $300 million in EBITDA.

PC achieved sales of $115 million compared to $148 million in the prior year. On slide 32, our sales forecast for 2021 has been revised to be approximately $1.7 billion compared with $1.67 billion in the prior year to reflect the lower than previously expected PC volumes on our third and fourth quarter. On slide 33, we are adjusting our 2021 EBITDA projections to now be approximately $220 million, which is at the low end of our previously communicated range. On slide 34, our adjusted earnings per share guidance is now expected to be approximately $4.12, which is comparable to our all-time high 2020 adjusted earnings per share despite the negative impact of $0.40 per share from our higher estimated effective tax rate. Our $4.12 estimate for 2021 is lower than our prior estimate range, primarily due to our effective tax rate increasing from prior projections.

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For the quarter, sales increased 24%. Excluding acquisitions, divestitures and currency, sales increased 18%. Operating profit increased 27% and margins expanded 60 basis points to 20.1%, principally due to strong volume leverage. Earnings per share increased an outstanding 34%. Turning to our plumbing segment, sales increased 48%, excluding currency, led by exceptional growth from our North American and international faucet and shower businesses and our spa business. International plumbing grew 50% in the quarter, excluding currency, as Hansgrohe sales rebounded sharply in nearly all of its markets. North American plumbing posted strong growth of 47%, excluding currency, in the second quarter, led by approximately 75% growth at Watkins Wellness and robust double digit growth at Delta. In our decorative architectural segment, sales declined 5% against the healthy 8% comp for the second quarter of 2020. For the decorative segment overall, we now expect growth to be in the range of 2% to 5% for the full year. We continued our aggressive share buyback during the quarter by repurchasing 6.6 million shares for $447 million. As part of the accelerated share repurchase agreement that we executed during the quarter, we will additionally receive approximately 900,000 shares in July to complete that agreement, bringing our total shares repurchased year-to-date to 13.1 million shares for $750 million. This is approximately 5% of our outstanding share account at the beginning of the year. Underscoring our strong financial position and confidence in the future, we now anticipate deploying another $250 million in the second half of the year for share repurchases and acquisitions for a full year total of approximately $1 billion. And with an improved outlook for plumbing based on the continued strength of both our North American and international operations, we are increasing our full year expectations of earnings per share to be in the range of $3.65 to $3.75 per share, up from our previous expectations of $3.50 to $3.70. As a result, sales increased 24% with currency and net acquisitions, each contributing 3% to growth. In local currency, North American sales increased 15% or 12%, excluding acquisitions. In local currency, international sales increased a robust 50% or 49%, excluding acquisitions and divestitures. Gross margin was 36.3% in the quarter, up 50 basis points as we leverage the strong volume growth. Our SG&A as a percentage of sales improved 10 basis points to 16.2% due to our operating leverage. We delivered strong second quarter operating profit of $438 million, up $94 million or 27% from last year, with operating margins expanding 60 basis points to 20.1%. Our earnings per share was $1.14 in the quarter, a 34% increase compared to the second quarter of 2020, due to volume leverage, lower interest expense and lower share count. Plumbing growth accelerated in the quarter with sales up 53%. Currency contributed 5% to this growth and acquisitions, net of divestitures, contributed another 4%. North American sales increased 47% in local currency or 41%, excluding acquisitions. International plumbing sales increased 50% in local currency or 49%, excluding acquisitions and divestitures. Segment operating margins expanded 230 basis points to 20.6% in the quarter, with operating profit of $274 million, up $115 million or 72%. Given our second quarter results and current demand trends, we now expect plumbing segment's sales growth for 2021 to be in the 22% to 24% range, up from our previous guidance of 15% to 18%. Finally, due to our improved sales outlook, we are increasing our full year margin expectations to approximately 18.5%, up from our previous guide of approximately 18%. Decorative architectural declined 5% for the second quarter and was 6%, excluding the benefit from acquisitions. Segment operating margins were 22.1% and operating profit in the quarter was $188 million due to lower volume, partially offset by cost productivity initiatives. For full year 2021, we now expect decorative architectural segment's sales growth will be in the range of 2% to 5%, down from 4% to 9% due to lower than expected second quarter sales and persistent raw material constraints. We continue to expect segment operating margins of approximately 19% as productivity initiatives in pricing help offset higher input costs. Turning to Side 10. Our balance sheet is strong with net debt to EBITDA at 1.3x. We ended the quarter with approximately $1.8 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 16.9%, an improvement of 120 basis points over prior year. As we discussed last quarter, we terminated and annuitized our U.S. qualified defined benefit plans in the second quarter and had an approximate $100 million final cash contribution to the plans to complete this activity. This removes approximately $140 million of pension liabilities from our balance sheet, and it will benefit our free cash flow by approximately $50 million through reduced cash contributions, starting in 2022. Also, we received approximately $166 million from the redemption of our preferred stock related to the recent sale of our former cabinet business. Finally, as Keith mentioned earlier, as of today, we repurchased 13.1 million shares in 2021 for $750 million. We expect to deploy an additional $250 million for share repurchases or acquisitions for the remainder of this year. Based on our second quarter performance and continued robust demand, we now anticipate overall sales growth of 14% to 16%, up from 10% to 14% with operating margins of approximately 17.5%, up from 17%. Lastly, as Keith mentioned earlier, our updated 2021 earnings per share estimate range of $3.65 to $3.75 represents 19% earnings per share growth at the midpoint of the range. This assumes the 252 million average diluted share count for the full year. The fundamentals of our repair and remodel business are strong, with year-over-year home price appreciation of over 15% in May and existing home sales up over 23%. And the consumer is strong, with nearly $2 trillion in savings and an increased desire to invest in their homes.

For the quarter, sales increased 24%. And with an improved outlook for plumbing based on the continued strength of both our North American and international operations, we are increasing our full year expectations of earnings per share to be in the range of $3.65 to $3.75 per share, up from our previous expectations of $3.50 to $3.70. Our earnings per share was $1.14 in the quarter, a 34% increase compared to the second quarter of 2020, due to volume leverage, lower interest expense and lower share count.

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The contribution from Energy Services enabled us to increase our NFE guidance for fiscal 2021 for the second time this year to a range of $2.05 to $2.15 per share from our original guidance of $1.55 to $1.65 per share. At New Jersey Natural Gas, we filed a base rate case to recover almost $850 million of infrastructure investments in the settlement of our last rate case. This includes costs associated with the Southern Reliability Link, which is over 90% complete and expected to be placed into service this fiscal year. This new program authorized $259 million in spending over three years, furthering our commitment to sustainability by helping customers lower their energy usage, save money and reduce their carbon footprint. At Clean Energy Ventures, we completed our first commercial solar project into service, adding 2.7 megawatts of installed capacity. We are increasing our fiscal 2021 NFE guidance to $2.05 to $2.15 per share, an increase of $0.20 per share compared to our March 15 update. As a reminder, guidance for fiscal 2022 is $2.20 to $2.30 per share. And we are maintaining our long-term annual growth rate of 6% to 10% for fiscal 2022 NFE, excluding hedged services. On March 30, we requested an increase to base rates of $165.7 million, equivalent to an increase of $118 million in operating income. Since the conclusion of our last case in 2019, New Jersey Natural Gas has invested nearly $850 million to upgrade and enhance the safety and reliability of our transmission and distribution systems. This includes the installation of the Southern Reliability Link at a cost of more than $300 million. Looking at the top left, we invested $198 million this fiscal year with about 26% of the capex providing near real-time returns. We added almost 3,700 new customers over the first six months of the year, below our regular growth rate due to the ongoing pandemic. However, we still expect to add approximately 28,000 to 30,000 new customers during the three-year period from fiscal 2021 to 2023. We now have over 360 megawatts of installed capacity. Total invested capital at CEV for the first six months was $38 million. However, we remain on track to meet our goal of adding incremental 160 to 180 megawatts of capacity by the end of fiscal year 2022. Reported NFE of $170.6 million or $1.77 per share compared to NFE of $84.3 million or $0.88 per share in the second quarter of fiscal 2020. Energy Services improved $94 million primarily due to higher financial margin compared to last year, the details of which I'll take you through on the next slide. For fiscal 2021, we now expect to spend between $96 million and $180 million at CEV compared to our prior forecast of approximately $165 million. We still expect to reach our goal of adding 160 to 180 megawatts of capacity over the two-year period. On slide 13, you can see our product pipeline for fiscal 2021 and 2022 was about $255 million, which represents 80% of our targeted capex for the next two years. Approximately 1/3 of our project pipeline is currently out-of-state projects. And for the projects in New Jersey, we expect to earn an average TREC factor of 0.9 per kilowatt hour. We have 93% of our 2024 volume hedge. The market fundamentals for energy years 2025 to 2026 are supporting strong pricing, with SREC trading at or above 85% of SACP, with 36% and 10% hedged for 2025 and 2026, respectively. CEV has a strong pipeline of projects that will allow us to reach our goal of adding 160 to 180 megawatts of capacity by the end of fiscal 2022.

The contribution from Energy Services enabled us to increase our NFE guidance for fiscal 2021 for the second time this year to a range of $2.05 to $2.15 per share from our original guidance of $1.55 to $1.65 per share. We are increasing our fiscal 2021 NFE guidance to $2.05 to $2.15 per share, an increase of $0.20 per share compared to our March 15 update. Reported NFE of $170.6 million or $1.77 per share compared to NFE of $84.3 million or $0.88 per share in the second quarter of fiscal 2020.

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It was almost a year ago, the great uncertainty filled the world, and I predicted that we would see more change in sealing two years than in the past 10. In the last two quarters, we've brought on about 70 senior commercial colleagues to strengthen our bench of talent across the globe. At the end of the third quarter we hold rewards data for over 20 million people, over 70 million assessments have been taken. We've got organizational benchmark data on 12,000 entities. We have 3,900 individual success profiles covering almost 30,000 job titles. Our proprietary recruiting AI tool has compiled more than 550 million profiles of potential candidates across the globe. Every year we train and develop nearly 1 million professionals. Revenue was up 9% sequentially to $475 million and our earnings and profitability reached record highs with about $97 million of adjusted EBITDA and a little over a 20% adjusted EBITDA margin. Back then, our fee revenue in the quarter immediately following the peak quarter was down approximately 43%, two quarters out it was still down 32%. Now if we fast forward a few years and look at the COVID-19 recession, the decline in fee revenue from the peak quarter was only 16%, in two quarters out, we're only down 8%, that's a substantial improvement from the great recession. Year-to-date subscription base fee revenue grew 27% while our third quarter new business that was subscription based was up a 123% year-over-year and almost 48% sequentially. And we're also, as we've talked about, we're continuing to see success in capturing larger consulting engagements, we would classify those that have a value of $500,000 or more and these engagements are absolutely driven by our integrated solution strategy that provide us with more enduring client relationships of scale. Year-to-date large new business consulting engagements were up 23%. And these large engagements are also driving a growing backlog of 24% year-over-year which obviously enhances revenue visibility and durability. In the third quarter, our marquee and regional account fee revenue declined only 2% year-over-year, while the rest of the portfolio was down about 11% and on a year-to-date basis, our marquee and regional accounts, they've have been relatively aggressive. It's up 1% year-over-year, while the rest of the portfolio declined 13%. it is about three years ago, our cross referrals were about 15% of our portfolio. Today that number stands at 26%. Our long-term goal is to take our expertise in IP and develop 1 million new leaders from diverse backgrounds using our Korn Ferry Advance and Leadership U platforms. As Gary mentioned, fee revenue in the third quarter was $475 million. Additionally, fee revenue growth in the third quarter, this is measured year-over-year, was up 7% for RPO. We also saw a substantial improvement in Consulting and that was only down 3% year-over-year, and in Professional Search, that was only down 2% year-over-year. Our adjusted EBITDA grew $31 million or 46% sequentially to $97 million and our adjusted EBITDA margin improved 510 basis points to 20.3%. Adjusted fully diluted earnings per share also reached a record level in the third quarter, improving to $0.95, now that was up $0.41 or 76% sequentially and up $0.20 or 27% year-over-year. Now, it's important to note that full employee salaries have been reinstated effective January 1, 2021. So similar to the second quarter, our cost structure in the third quarter reflects 100% of all employees compensation costs. On a consolidated basis, our new business awards excluding RPO were down only 1% year-over-year. Consulting was up 8%, digital was up 14%, executive search was up 8% and professional search was up 31%. At the end of the third quarter, our cash and marketable securities totaled $897 million. Now, if you exclude amounts reserved for deferred comp and accrued bonuses, our investable cash balance at the end of the third quarter was approximately $534 million, which is up $73 million sequentially and up $112 million year-over-year. Now to date, obviously, we have successfully managed in the depth at our business to the changing environment and we are now investing back into the recovery, as Gary mentioned by hiring 70 senior commercial colleagues over the past two quarters. Global fee revenue for KF Digital was $76 million in the third quarter. Consistent with the second quarter, the subscription and licensing component of KF Digital fee revenue in the third quarter was $23 million. Global new business in the third quarter for the Digital segment grew 14% sequentially to $100 million, the best quarter of new business since the beginning of the COVID recession. Additionally, 43% of new business in the third quarter was subscriptions and licenses, which is the highest portion of any quarter to date. Adjusted EBITDA in the third quarter for KF Digital was up $4 million sequentially to $27.1 million with a 35.8% adjusted EBITDA margin. In the third quarter, Consulting generated $136.3 million of fee revenue, which is up approximately $9.5 million or 8% sequentially and down only 3% measured year-over-year. Sequentially global new business was up 8% with growth in every region. Adjusted EBITDA for Consulting in the third quarter was up $7.3 million sequentially to $27.5 million with adjusted EBITDA margin of 20.2%. RPO and Professional Search global fee revenue improved to $95.2 million in the third quarter, which is up 11% sequentially and up 4% year-over-year. RPO fee revenue was up approximately 4% sequentially and professional search fee revenue was up approximately 24% sequentially. As previously mentioned, measured year-over-year, RPO fee revenue was up 7% in the third quarter. With regards to new business, in the third quarter, professional search was up 31% sequentially and RPO was awarded another $44 million of new contracts, consisting of $12 million of renewals and extensions and $32 million of new logo work. Adjusted EBITDA for RPO and Professional Search in the third quarter was up approximately $5.8 million sequentially to $19.6 million with an adjusted EBITDA margin of 20.6%. Finally for executive search, global fee revenue in the third quarter was $168 million, up $20 million or 14% sequentially with growth in every region. Sequentially, North America was up approximately 16%, while EMEA and APAC were up approximately 14% and 4% respectively. The total number of dedicated executive search consultants worldwide at the end of the third quarter was 522 which was up 10 sequentially. Annualized fee revenue production per consultant in the third quarter improved to $1.3 million and the number of new search assignments opened worldwide in the third quarter was 1,300. In the third quarter adjusted EBITDA grew approximately $13.4 million sequentially to $41.7 million with an adjusted EBITDA margin of 24.8%. Considering this and assuming no new major pandemic related lockdowns, changes in worldwide economic conditions financial markets and foreign exchange rates, we expect our consolidated fee revenue in the fourth quarter of fiscal '21 to range from $475 million to $500 million, and our consolidated diluted earnings per share to range from $0.95 to $1.05. If you go back prior to the pandemic, we were essentially a $2 billion business within adjusted EBITDA margin of around 15% to 16%. As we return to the pre-pandemic levels of fee revenue, our business will benefit from previously mentioned structural changes and we're going to add around 200 basis points to our adjusted EBITDA margin, and as a result, we expect near-term consolidated margins beyond the fourth quarter to range from 17% to 18%.

Adjusted fully diluted earnings per share also reached a record level in the third quarter, improving to $0.95, now that was up $0.41 or 76% sequentially and up $0.20 or 27% year-over-year. Now, it's important to note that full employee salaries have been reinstated effective January 1, 2021. Considering this and assuming no new major pandemic related lockdowns, changes in worldwide economic conditions financial markets and foreign exchange rates, we expect our consolidated fee revenue in the fourth quarter of fiscal '21 to range from $475 million to $500 million, and our consolidated diluted earnings per share to range from $0.95 to $1.05.

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The release and corresponding financial supplement are available on assurant.com. For the first time, Assurant was awarded a Bronze accreditation by EcoVadis, one of the largest sustainability ratings companies, ranking Assurant among the top 50% of all 75,000 participating companies. In addition, this quarter we provided additional transparency to track our progress on our journey to build a more diverse and inclusive Assurant, with the recent disclosure of our EEO-1,which provides gender, race and ethnicity data by job category for our U.S.-based employees. Looking at our financial performance year-to-date, net operating income per share excluding reportable catastrophes was $8.75, up 12% compared to the first nine months of last year. Net operating income and adjusted EBITDA also excluding cats, both increased by 10% to $528 million and $862 million, respectively. These results support our full year outlook of 10% to 14% growth in net operating income per share excluding reportable catastrophes, marking our fifth consecutive year of strong profitable growth. We've also now completed our three-year $1.35 billion capital return objective from our 2019 Investor Day, a quarter ahead of schedule. Following the close on the sale of Global Preneed in August, we've also made meaningful progress in returning an additional $900 million to shareholders. In Global Lifestyle, we are on track to grow adjusted EBITDA by double digits in 2021 from $637 million in 2020, driven by Global Automotive and Connected Living. Within Global Automotive, we benefited from increased scale, growing the number of vehicles we protect by 20%, over 52 million since The Warranty Group acquisition in 2018. In Global Housing, we continue to be on track for another year of better than market returns, with an annualized operating ROE of nearly 15% for the first nine months of this year. This includes $113 million of catastrophe losses, which further demonstrates the superior returns of this differentiated business. Our Multifamily Housing business now supports over 2.5 million renters across the U.S. and has more than doubled earnings since 2015 through our strong partnerships with our affinity and property management company clients. Our investments in digital capabilities, such as our cover 360 property management solution continues to drive more value for our partners and an enhanced customer experience. Most of all, I'm humbled by our 15,000 employees, who through their dedication to serve our clients and our 300 million customers worldwide have successfully transformed Assurant. Together, we have significantly strengthened our Fortune 300 company that should continue to deliver above-market growth and superior cash flow. Gene's significant contributions to Assurant over the last 30 plus years, including as COO over his last five years have been instrumental in creating market-leading positions, producing profitable growth and transforming the organization. In succeeding Gene, Keith Meier brings nearly 25 years of experience at Assurant to the COO role. With over 30 years of experience, he currently leads the transformation and growth strategy for Auto and has been instrumental in our introduction of innovative new products like EB-1, our electric vehicle warranty protection. As of November 1st, Assurant is partnering with T-Mobile to begin the nationwide rollout of in-store device repair services to approximately 500 stores, provided by Assurant's industry certified repair experts. As a result, this significantly adds to our mobile device count, now at roughly 63 million as of November 1st. With the growing availability and popularity of 5G-enabled smartphones, we expect to see our 30 plus trade-in and upgrade programs continue to grow. Overall, we have processed nearly 18 million devices so far this year, reducing e-waste and increasing digital access with high quality, affordable phones. In Global Automotive, policies increased by $4 million or 8% year-over-year and production is well above pre-pandemic levels as we continue to take advantage of our scale and talent. As we drive innovation within Auto, we continued the global rollout of EV-1, an electric vehicle and hybrid protection product to North America. EV-1 has now been rolled out in seven countries. While the electric vehicle market is still in its infancy, our EV-1 product will allow Assurant an opportunity to better evaluate customer demand and leverage our learnings to position us well for the expected increase in electric vehicle adoption in the future. Our Multifamily Housing business grew policies by 7% year-over-year from growth in our affinity partners as well as our PMC relationships, where we continue the rollout of our innovative cover 360 product. For the quarter, we reported net operating income per share excluding reportable catastrophes of $2.73, up 5% from the prior year period. Excluding cats, net operating income and adjusted EBITDA for the quarter, each increased 4% to $162 million and $262 million, respectively. This segment reported net operating income of $124 million in the third quarter, continued earnings expansion within Connected Livings mobile business. In Global Automotive, earnings increased $8 million or 21% from continued global growth in our U.S. national dealer and third-party administrator channels, including contributions from our AFAS and international OEM channels. Connected Living earnings increased by $6 million or 9% year-over-year. For the quarter, Lifestyle's adjusted EBITDA increased 17% to $177 million. As we look at revenues, Lifestyle revenues increased by $158 million or 9%. Within Connected Living, revenue increased 10% boosted by mobile fee income that was driven by strong trade-in volumes, including contributions from Hyla. First, the 750,000 subscribers related to a run-off of European banking program previously mentioned, which is not expected to be a significant impact in our profitability. In Global Automotive, revenue increased 8%, reflecting strong prior period sales of vehicle service contracts. Industry auto sales remained elevated in the third quarter and we benefited from this trend as reflected in the year-over-year growth of our net written premium by 12%. For the full year, Lifestyle revenues are expected to increase modestly compared to last years $7.3 billion, mainly driven by Global Auto and Connected Living growth. For all of 2021, we still expect Global Lifestyle's net operating income to grow in the high single digits compared to 2020. In addition, we expect our effective tax rate to return to a more normal level, approximately 23%. Moving to Global Housing, net operating income excluding catastrophe losses was $81 million for the third quarter, including the $78 million of pre-announced catastrophe losses mainly from Hurricane Ida, net operating income totaled $3 million. Excluding catastrophe losses, earnings decreased $19 million due to anticipated higher non-cat losses, which returned to levels more in line with historical averages. At Corporate, the net operating loss was $21 million, an improvement of $4 million compared to the third quarter of 2020. For the full year 2021, we now expect the Corporate net operating loss to be approximately $80 million, driven by favorable year-to-date results mainly from the one-time tax and real estate joint venture benefits in the second quarter. This compares to our previous estimate of $85 million. As we look forward to 2022, we would expect our net operating loss in Corporate to be closer to $90 million, more in line with historical trends. Turning to the holding company liquidity, including the net proceeds from the sale of Preneed in August, we ended the third quarter with over $1.3 billion, well above our current minimum target level. In the third quarter, dividends from operating segments totaled $127 million. In addition to our quarterly corporate and interest expenses, we also had outflows from three main items, $323 million of share repurchases, $39 million in common stock dividends and $11 million mainly related to Assurant ventures investment. In addition to completing our 2019 Investor Day objective of returning $1.35 billion to shareholders from 2019 through 2021, we have also completed roughly one-quarter of our objective to return $900 million in Global Preneed sale proceeds through share repurchases. We are pleased with the results as the three investment exceeded a 7 times multiple on investment capital under their respective SPAC transaction terms. These transactions combined with strong performance in the broader ventures portfolio led to a $75 million after-tax gain flowing through net income in the quarter.

The release and corresponding financial supplement are available on assurant.com. These results support our full year outlook of 10% to 14% growth in net operating income per share excluding reportable catastrophes, marking our fifth consecutive year of strong profitable growth. For the quarter, we reported net operating income per share excluding reportable catastrophes of $2.73, up 5% from the prior year period. In Global Automotive, revenue increased 8%, reflecting strong prior period sales of vehicle service contracts. For all of 2021, we still expect Global Lifestyle's net operating income to grow in the high single digits compared to 2020.

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Notably, if you look at, for example, August and September Chapter 11 filings and defaults, they fell to just over half the level that they were between May and July. And if you build in a more typical ratio of fourth quarters compared to prior quarters, you get to the $5.25 to $5.75 range for adjusted EPS, that Ajay will now talk about, as opposed to the $5.50 to $6 that we had before. Underscoring our market-leading positions and resiliency, even in the face of a global pandemic, this quarter's revenue of $622.2 million was a record high. Both billable headcount of 5,019 and year-over-year billable headcount growth of 15.8% were records that are giving us ample capacity for future growth and profits. For the quarter, revenues of $622.2 million were up $29.1 million or 4.9%,, compared to revenues of $593.1 million in the prior-year quarter. GAAP earnings per share of $1.35 in 3Q '20, compared to $1.59 in the prior-year quarter. Adjusted earnings per share of $1.54, compared to $1.63 in the prior-year quarter. The difference between our GAAP and adjusted earnings per share in the quarter reflects a $7.1 million special charge, which reduced GAAP earnings per share by $0.14 and $2.3 million of some noncash interest expense related to our convertible notes, which decreased GAAP earnings per share by $0.05. First, we announced in August that we have leased approximately 120,000 square feet of new space at 1166 Avenue of the Americas, consolidating from approximately 160,000 square feet of space in two offices in New York. In advance of this, and given most employees are currently working from home, we have already abandoned 67,000 square feet of space resulting in around $4.7 million in lease abandonment and relocation costs. Second, in the quarter, we took performance-related actions in our FLC segment that resulted in severance and other employee-related costs of $2.4 million. As of September 30, 2020, our weighted average shares outstanding, or WASO, of 37.1 million shares, compared to 37.9 million shares of September 30, 2019. WASO includes the potential dilutive impact of our convertible notes, which at the end of this quarter was approximately 337,000 shares. We have more than offset both dilution from our convertible notes and from normal course equity compensation by repurchasing 1.9 million shares over the last 12 months. Third quarter 2020 net income of $50.2 million, compared to net income of $60.4 million in the prior-year quarter. The year-over-year decrease was largely because direct costs increased $36.3 million, which was primarily related to 15.8% increase in billable headcount. We also have the $7.1 million special charge and FX remeasurement losses of $3.5 million due to weakening of the U.S. dollar against other major currencies, which, compared to a $2 million gain in the prior-year quarter. SG&A expenses in the third quarter of $122.1 million were the 19.6% of revenues. This compares to SG&A of $128 million or 21.6% of revenues in the third quarter of 2019. The decrease was primarily due to lower travel and entertainment expenses, resulting from COVID-19-related travel restrictions and lower bad debt, which was partially offset by an increase in salaries and employee-related expenses driven by the 11% year-over-year increase in nonbillable headcount. Third quarter 2020 adjusted EBITDA of $90.9 million or 14.6% of revenues, compared to $92.3 million or 15.6% of revenues in the prior-year quarter. Our effective tax rate for the third quarter of 22.3%, compared to 24.7% in the prior-year quarter. The 2.4% decline was primarily due to a favorable discrete tax adjustment related to some share-based compensation. Billable headcount increased by 685 professionals or 15.8%, compared to the prior-year quarter. Sequentially, billable headcount was up by 374 professionals or 8.1%. In Corporate Finance & Restructuring, revenues of $236.6 million increased 23.4%, compared to the prior-year quarter. Acquisition-related revenues in the quarter were $15.4 million. As a reminder, we consider revenues as acquisition-related for the first 12 months post acquisition. Adjusted segment EBITDA of $56.2 million or 23.8% of segment revenues, compared to $48.1 million or 25.1% of segment revenues in the prior-year quarter as higher revenues more than offset an increase in compensation, primarily related to a 36.6% increase in billable headcount and higher variable compensation. On a sequential basis, Corporate Finance & Restructuring revenues decreased $9.4 million or 3.8%. Sequentially, adjusted segment EBITDA declined more than revenue because of sharply higher headcount-related costs driven by the 18.1% increase in billable headcount. Turning to FLC, our revenues of $119.1 million decreased 16.5%, compared to the prior-year quarter. Adjusted segment EBITDA of $13.6 million or 11.4% of segment revenues, compared to adjusted EBITDA of $27 million or 18.9% of segment revenues in the prior-year quarter. Sequentially, FLC revenues increased $12.7 million or 12% as demand rose for our investigations, data and analytics and dispute services. Our adjusted EBITDA increased $22.6 million compared to the second quarter of 2020. As I mentioned earlier, during the quarter, we took a special charge within our FLC segment, resulting from severance payments to 16 employees. Our economic consulting segment's revenues of $155 million increased 9.4% compared to the prior-year quarter. Our adjusted segment EBITDA of $25.7 million or 16.6% of segment revenues, compared to $19.4 million or 13.7% of segment revenues in the prior-year quarter. The year-over-year increase in adjusted segment EBITDA was due to higher revenues, which was partially offset by an increase in compensation primarily due to a 15.2% increase in billable headcount and higher variable compensation. Sequentially, Economic Consulting's revenues increased $3.5 million or 2.3%. In Technology, revenues of $58.6 million increased 2.6% compared to the prior-year quarter. Adjusted segment EBITDA of $11.9 million or 20.4% of segment revenues, compared to $12.3 million or 21.5% of segment revenues in this prior-year quarter. The decrease in adjusted segment EBITDA was due to higher compensation primarily related to a 13.2% increase in billable headcount. On a sequential basis, Technology revenues increased $11.5 million or 24.4% primarily due to higher demand for our investigation services and a surge in demand for M&A-related second request services. Revenues in the strategic communications segment of $53 million decreased $7 million or 11.7% compared to the prior-year quarter. The decrease in revenues was primarily due to lower demand for corporate reputation and financial communications services and a $2.3 million decline in pass-through revenues. Adjusted segment EBITDA of $8.4 million or 15.9% of net segment revenues, compared to $12.6 million or 21.1% of segment revenues in the prior-year quarter. Sequentially, strategic communications revenues decreased $3.9 million or 6.9%, primarily due to a decline for our restructuring and financial communications services, which had surged during the second quarter with a rush of bankruptcy filings. We generated net cash from operating activities of $111.6 million and free cash flow of $99.8 million in the quarter. Total debt net of cash of $36.6 million decreased $21.2 million, compared to $57.8 million at September 30, 2019. During the quarter, we have repurchased 749,315 shares at an average price per share of $110.57 for a total cost of $82.9 million. At the end of the quarter, we had approximately $182.4 million remaining available for share repurchases under our current authorization. We now expect 2020 revenues will range between $2.42 billion and $2.47 billion. This compares to the previous revenue range of $2.45 billion to $2.55 billion. We now expect 2020 GAAP earnings per share will range between $4.93 and $5.43. This compares to the previous GAAP earnings per share range of between $5.32 and $5.82, and includes our third-quarter special charge of $0.14 per share and an estimated noncash interest expense of $0.18 per share related to 2023 convertible notes. And we now expect 2020 adjusted earnings per share will range between $5.25 and $5.75. This compares to the previous adjusted earnings per share range of $5.50 to $6. And we expect waves of defaults in the coming 12 to 24 months, so timing is uncertain. And fifth, in the last 12 months, we have reduced net debt by $21.2 million while repurchasing $212.2 million worth of our shares, and acquiring Delta Partners, the preeminent technology, media and telecom focused consulting practice.

And if you build in a more typical ratio of fourth quarters compared to prior quarters, you get to the $5.25 to $5.75 range for adjusted EPS, that Ajay will now talk about, as opposed to the $5.50 to $6 that we had before. For the quarter, revenues of $622.2 million were up $29.1 million or 4.9%,, compared to revenues of $593.1 million in the prior-year quarter. GAAP earnings per share of $1.35 in 3Q '20, compared to $1.59 in the prior-year quarter. Adjusted earnings per share of $1.54, compared to $1.63 in the prior-year quarter. We now expect 2020 revenues will range between $2.42 billion and $2.47 billion. We now expect 2020 GAAP earnings per share will range between $4.93 and $5.43. And we now expect 2020 adjusted earnings per share will range between $5.25 and $5.75.

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First, maximize cash flow over the next five years sustaining a reinvestment rate of less than 75%. Secondly, our second-quarter bond tender and new issuance reduced near-term maturities by nearly $400 million. Among reported ESG metrics, most notable are our reported 37% decline in greenhouse gas emissions intensity in 2020 versus 2019 and a 20% decline in methane intensity. Starting with production, we beat the top end of guidance with production at 12.4 million BOE or 136,500 BOE per day. And this was due mainly to performance from the Austin Chalk, where both base production and new wells were stronger than we had modeled. For the quarter, oil production percentage was a healthy 54%. Capex of $214 million came in under our guidance range of $230 million to $240 million. This related to timing as our capital expenditure estimate for the full year remains unchanged. We drilled 22 and completed 45 net wells in the quarter. For the first half of 2021, capital expenditures totaled $399 million, and we drilled 40 net wells and completed 62 net wells. So we're roughly 60% through our capital program for the year. Here, we see the substantial reduction in near-term maturities due through 2024 which at second quarter end stood at $223 million including the revolver. We termed out approximately $400 million in debt with the issuance of new six and a half percent notes due 2028. The tender offer and issuance transactions went extremely well, was actually oversubscribed by 10 times. Updating our hedge positions on Slide 8, we have 75% to 80% of oil production and about 85% of natural gas production hedged the second half of 2021, details by quarter in the appendix. We did narrow the range around production to 47.5 million to 49.5 million BOE, and that range really relates to ultimate timing of wells coming on. Third-quarter production is expected to range between 13 million to 13.2 million BOE or 141,000 to 143,000 BOE per day 53% to 54% oil. In terms of cadence, the remaining capital activity will be heavier weighted to the third quarter, with the third-quarter capital guidance range forecasted to be between $170 million to $190 million. We're now expecting full-yea activity to include about 85 net wells drilled and 100 to 110 net wells completed. While we have previously confirmed drilling the 20,900 foot almost 4-mile long lateral which we drilled in 20 days, we now have the well on production. These operations went smoothly, and we were able to complete an average of 16 stages per day about twice the pace of a typical zipper frac, and we're able to complete as many as 24 stages in a day. We are often asked if we expect to keep improving our already efficient operations which we continue to run at around $520 per lateral foot. Three new wells averaged 3,300 BOE per day. And the wells have an estimated breakeven oil price of just $24 per barrel. Also, I will remind you that our transportation costs for natural gas in South Texas dropped by about $0.25 per mcf starting this month, another factor contributing to better economics in the South Texas program.

And this was due mainly to performance from the Austin Chalk, where both base production and new wells were stronger than we had modeled. For the quarter, oil production percentage was a healthy 54%. This related to timing as our capital expenditure estimate for the full year remains unchanged. We did narrow the range around production to 47.5 million to 49.5 million BOE, and that range really relates to ultimate timing of wells coming on.

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In second quarter, Cullen/Frost earned $93.1 million or $1.47 per share compared with earnings of $109.6 million, or $1.72 per share in the same quarter of last year and $47.2 million or $0.75 a share in the first quarter of this year. To add our response to the COVID-19 pandemic, we've been continuing serving customers with appointments in our bank lobbies, to our motor banks, with our online and mobile banking service, to around the clock telephone customer service and at our network of more than 1200 ATMs. I'll talk in more detail about our Houston expansion and our Paycheck Protection Program loans. In fact, during the second quarter, we learned that Frost had achieved its highest ever Net Promoter Score with a jump from 82 to 87. As of June 30, when PPP loan applications were initially scheduled to end, we had helped nearly 18,300 of our customers get PPP loans, totaling more than 3.2 billion. In the state of Texas, Frost was number three in PPP lending with 5% of the loans in San Antonio, Fort Worth and Corpus Christi, Frost was number one in terms of PPP loans approved and in San Antonio we had more PPP loans in Bank of America, Chase and Wells Fargo, combined. We did well helping businesses of all sizes, but I'm particularly pleased that more than three quarters of our PPP loans were for $150,000 or less, and close to 90% were for 350,000 or less. PPP applications have been extended into August and we're still taking anywhere from a few to 50 applications per day. Through July, we've taken an additional 500 applications for over $22 million or an average size of about $45,000. Average deposits in the second quarter were $31.3 billion, up by more than 20% from the $26 billion in the second quarter of last year, and the highest quarterly average deposits in our history. Average loans in the second quarter were $17.5 billion, up by more than 20% from the $14.4 billion in the second quarter of last year. That includes our strong showing in PPP loans, but our loan total would have been up approximately 5% even without PPP. In the second quarter our return on average assets was 0.99%, compared to 1.4% in the second quarter of last year. Our credit loss expense was $32 million in the second quarter, compared to $175.2 million in this first quarter of 2020 and $6.4 million in the second quarter of 2019. That first quarter provision was significantly influenced by our energy portfolio stress scenario of oil at $9 per barrel for the remainder of 2020. Oil prices have since stabilized at levels well above that assumption, and the energy borrowing base redeterminations are 95% complete. Net charge-offs for the second quarter were $41 million, compared to $38.6 million in the first quarter and $7.8 million in the second quarter of last year. Annualized net charge-offs for the second quarter were 0.94% of average loans. Non-performing assets were $85.2 million at the end of the second quarter compared to $67.5 at the end of the first quarter, and $76.4 at the end of the second quarter last year. At the current level, non-performing assets represent only 22 basis points of assets which is well within our tolerance level and our level lower than our average non-performing assets over the past nine quarters. Overall delinquencies for accruing loans at the end of the second quarter were $91 million, or 51 basis points of period end loans. To the end of the second quarter, we granted 90 day deferrals, totaling $2.2 billion. Of loans whose deferral period has now ended, which is about $1.1 billion, only $72 million worth have requested a second deferral. Total problem loans, which we define as risk grade 10 and higher were $674 million at the end of the second quarter, compared to $582 million at the end of the first quarter, which happened to be a multi year low. A subset of total problem loans, those loans graded 11 and worse, which is synonymous with the regulatory definition of classified totaled $355 million or only 12% of Tier 1 capital. Energy related problem loans were $176.8 million at the end of the second quarter, compared to $141.7 million for the previous quarter, and $93.6 million in the first quarter of last year. To put that into perspective, the year in 2016 total problem energy loans totaled nearly $600 million. Energy loans in general represented 9.6% of our non-PPP portfolio at the end of the second quarter, if you include PPP loans, energy loans were 7.9%. As a reminder, the peak was 16% back in 2015, and we continued to diversify our loan portfolio and to moderate our company's exposure to the energy segment. The total of these portfolio segments, excluding PPP loans, represented almost $1.6 billion at the end of the second quarter. Combined with our risk assessments, these conversations influence our loan loss reserve to these segments, which is 2.52% at the end of the second quarter. Overall, our focus for commercial loans continues to be on consistent balanced growth, including both core loan component, which we define is lending relationships under $10 million in size, as well as larger relationships, while maintaining our quality standards. New relationships are up by about 28%, compared with this time last year, largely because of our strong efforts in helping small businesses get PPP loans. When we ask these businesses why they came to Frost, 340 of them told us that PPP was a key factor. The dollar amount of new loan commitments booked through June dropped by about 3%, compared to the prior year. Regarding new loan commitments booked, the balance between these relationships went from 57% larger and 43% core at the end of the first quarter to 53% larger and 47% core so far in 2020. For instance, the percentage of deals lost to structure increased from 61% this time last year to 75% this year. Our weighted current active loan pipeline in the second quarter was up 24%, compared with the end of the first quarter. Overall, net new consumer customer growth rate for the second quarter was 2.2%, compared to the second quarter of 2019. Same-store sales, however, is measured by account openings were down by 30% through the end of the second quarter, as lobbies were opened only for -- by appointment only and through driving [Indecipherable]. In the second quarter 59% of our account openings came from our online channel, which includes our Frost Bank mobile app. Online account openings in total were 72% higher, compared to the second quarter of 2019. The consumer loan portfolio was $1.8 billion at the end of the second quarter, and it increased by 4.3%, compared to last year. Our Houston expansion continues on pace, with four new financial centers opened in the second quarter and two more opened already in the third quarter for a total of 17 of the 25 planned new financial centers. As Phil mentioned, we generated over $3.2 billion in PPP loans during the quarter. Our average fee on that portfolio was about 3.2% and translates into about $104 million. Our direct origination costs associated with these loans totaled about $7.4 million, resulting in net deferred fees of about $97 million, about 20% of the net fees were accreted into interest income during the second quarter. Looking at our net interest margin, our net interest margin percentage for the second quarter was 3.13%, down 43 basis points from the 3.56% reported last quarter, excluding the impact of our PPP loans, the net interest margin would have been 3.05%. The 43 basis point decrease in our reported net interest margin percentage, primarily resulted from lower yields on loans and balances at the Fed, as well as an increase in the proportion of balances at the Fed, as a percentage of earning assets, partially offset by lower funding cost. The taxable equivalent loan yield for the second quarter was 3.95%, down 70 basis points from the previous quarter, impacted by the lower rate environment with the March Fed rate cuts and decreases in LIBOR during the quarter. The yield on PPP loan portfolio during the quarter was 4.13% and had favorable 3 basis point impact on the overall loan yields for the quarter. Looking at our investment portfolio, the total investment portfolio averaged $12.5 billion during the second quarter, down about $463 million from the first quarter average of $13 billion. The taxable equivalent yield on the investment portfolio was 3.53% in the second quarter, up 7 basis points from the first quarter. Our municipal portfolio averaged about $8.5 billion during the second quarter, flat with the first quarter with the taxable equivalent yield also flat with the first quarter at 4.07%. At the end of the second quarter over 70% of the municipal portfolio was pre-refunded or PSF insured. The duration of the investment portfolio at the end of the second quarter was 4.4 years, compared to 4.6 years last quarter. Looking at our funding sources, the cost of total deposits for the second quarter was 8 basis points, down 16 basis points from the first quarter. The cost of combined Fed funds purchased and repurchase agreements, which consists primarily customer repos decreased 80 basis points to 0.15% for the second quarter from 0.95% in the previous quarter. Those balances averaged about $1.3 billion during the second quarter, up about $36 million from the previous quarter. Looking to non-interest expense, total non-interest expense for the second quarter decreased approximately $3.5 million, or 1.7%, compared to the second quarter last year. The expense decrease was impacted by the $7.4 million in PPP loan origination costs that were deferred and netted against the PPP processing fee, which were amortized into interest income as a yield adjustment over the life of those PPP loans. Excluding the favorable impact of deferring those origination fees related to PPP loans, total non-interest expenses would have been up $3.8 million, or 1.9%, compared to the second quarter last year. As we look out for the full-year, adding back to $7.4 million in deferred expenses related to the PPP loans I mentioned previously, we currently expect annual expense growth of something around 6%, which is down 2.5 percentage points from the 8.5% growth guidance we gave last quarter. Regarding income tax expense, we did recognize a $2.6 million one-time discrete tax benefits during the quarter related to an asset contribution to a charitable trust during the second quarter. Excluding the impact of that item, our effective tax rate on a year-to-date earnings would have been about 3.1%.

In second quarter, Cullen/Frost earned $93.1 million or $1.47 per share compared with earnings of $109.6 million, or $1.72 per share in the same quarter of last year and $47.2 million or $0.75 a share in the first quarter of this year.

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Total order surpassed $2.2 billion and grew 40% over the prior year, reflecting a very strong demand pipeline across our portfolio of core automation and digital transformation solutions. Total revenue of over $1.8 billion grew 15% with additional sales that shifted in the fiscal '22 due to supply chain headwinds. Organic sales grew 13% versus prior year. Our ARR grew organically by over 18% and including our recent acquisition of Plex now accounts for over 8% of total sales. Segment margin of 18% came in line with our expectations with the execution of planned investments in Q4. Intelligent devices organic sales increased 15% versus prior year, even with significant headwinds from supply chain. From an orders perspective, this is the fourth consecutive quarter of record order intake in this segment with orders 30% above fiscal 2019 levels. Software and control organic sales grew 14% led by strong demand across the segment including double-digit growth in Logix. Orders grew approximately 50% year-over-year, once again showing great momentum across the software, control, visualization and network portfolios. In Lifecycle Services, organic sales increased 7% versus the prior year and increased 2% sequentially even with some projects delayed as a result of component availability. Lifecycle Services book to bill of $1.09 was well above seasonal Q4 levels. Total company backlog of $2.9 billion grew by over 80% year-over-year. Over 40% of backlog is related to our Lifecycle Services business. By Q4 as a relationship develop we pulled through an additional $4 million purchase of core automation products showcasing the tremendous synergy resulting from our new software capabilities and intelligent devices. With their ARR going 45% and over 470 new fixed customers added in just the last nine months. We had great performance in our discrete industry segment with roughly 15% sales growth. Within this industry segment, automotive sales grew about 15% led by an increase in EV capital project activity including a strategic win at Magna. One of the top Tier 1 auto manufacturers delivering EV content for GM and forward. Semiconductor was strong from 20% off of a very good quarter last year. E-commerce performance was also exceptional the sales growing approximately 30% versus a strong prior-year. Food and beverage grew about 15% led by strong greenfield and brownfield project opportunities in North America and EMEA, as well as strong double-digit OEM demand. Life Sciences grew over 15% in Q4 and remains one of our top growth verticals. Once again, our fastest growing vertical in the hybrid segment was Tire, which is up about 35% in the quarter. Process markets grew over 10% with strong sequential and year-over-year growth in oil and gas, especially in our Sensia JV. North America organic sales grew by 16% versus the prior year with strong double-digit growth across all three industry segments. EMEA sales increased 7% driven by strength in Food and Beverage, Tire and Metals. Sales in the Asia Pacific region grew 12% with broad-based growth led by EV, semiconductor, and mining. Record orders of $8.2 billion in 26%. Reported sales grew 11% even with supply chain constraints. Organic sales grew almost 7%. ICS revenue exceeded $500 million at year-end and grew double-digits organically. Adjusted earnings per share grew 20% and we once again generated significant cash flow due to our very profitable financial framework, strong focus on productivity and financial discipline. In fiscal '21, we accelerated funding of software development projects and deployed approximately $2.5 billion toward inorganic investments. At the same time we returned $800 million back to share owners in the form of dividends and buybacks. Our new fiscal '22 outlook expects total reported sales growth of 17.5% including 15.5% organic growth versus the prior year. We are increasing our margin expectations to 21.5% at 150 basis points over the prior year. Our new Adjusted earnings per share target of $10.80 at the midpoint of the range represents about 15% growth compared to the prior year. I should add that we expect another year of double-digit annual recurring revenue growth, including our recent Plex acquisition which adds approximately $170 million to our ARR totals in fiscal '22. Fourth quarter reported sales were up 15% over last year. Q4, organic sales were up 12.6% and acquisitions contributed one point to total growth. Currency translation increased sales by 1.5% points. Segment operating margin was 17.9% in line with our expectations. The 230 basis point decline was primarily related to higher planned investment spend, the reversal of temporary pay actions and the restoration of incentive compensation, partially offset by the impact of higher sales. Corporate and other expense was $33 million. Adjusted earnings per share of $2.33 was better than expected and grew 21% versus the prior year. The adjusted effective tax rate for the fourth quarter was negative 3%, much lower than expected, compared to 15% in the prior year. We generated $160 million of Free Cash Flow in the quarter. One additional item not shown on the slide, we repurchased 200,000 shares in the quarter at a cost of $61 million. For the full year, our share repurchases totaled $301 million in line with our July guidance. On September 30th, $152 million remained available under our repurchase authorization. Lifecycle Services' organic sales were up sequentially and up 7% year-over-year, led by oil and gas, Life Sciences including beverage. Compared to last year, Intelligent Devices margins were up 100 basis points on higher sales. Segment margins for the Software & Control segment declined 330 basis points compared to last year. Lifecycle Services segment margin was 8.1% and declined 820 basis points driven by the reversal of temporary pay actions, the reinstatement of incentive compensation, as well as unfavorable mix partially offset by higher sales. As you can see core performance was up about $0.70 on a 12.6% organic sales increase. Approximately $0.10 was related to non-recurring accelerated investments that we announced earlier this year. The reversal of temporary pay actions and restoration of incentive compensation contributed negative $0.45. Acquisitions were a $0.15 headwind due to the deal costs associated with the acquisition. As previously noted, our lower adjusted effective tax rate contributed $0.40. But the impact of the volume mix of $0.40 was mitigated to lower incentive compensation, further productivity and a favorable mix, all of which contributed $0.35. As previously noted, a more favorable tax rate benefited our earnings per share versus guidance by $0.25. Q4 product order levels grew at about 40% versus the prior year and are well above pre-pandemic levels as customers are increasingly interested in investing in our core automation and software. Reported sales grew 10.5% including over one point coming from acquisitions. Organic sales were up 6.7% led by double-digit growth in our hybrid and discrete end markets and improving process verticals. Full year segment margins remained at about 20% including close to $30 million of onetime accelerated investments mostly in our Software & Control segment. R&D expense was up 14% compared to fiscal '20 and R&D as a percent of sales increased further to 6% of sales in fiscal '21. Our core automation, which excludes the impacts-- Excuse me, our core conversion, which excludes the impact of acquisitions currency and our accelerated one-time investments was 34%. Corporate and others was at just over $20 million. Adjusted earnings per share was up 20%, a detailed year over year adjusted earnings per share walk can be found in the appendix for your reference. Free Cash Flow conversion was 103% of adjusted income. Finally,ROIC remained well above our target of over 20%. For the year we deployed about $3.3 billion of capital toward acquisitions, dividends and share repurchases in fiscal '21. As Blake mentioned, we are expecting sales of about $8.2 billion dollars in fiscal '22 up 17.5% at the midpoint of the range. We expect organic sales growth to be in the range of 14% to 17% and about 15.5% at the midpoint of our range. We expect full year segment operating margins to be about 21.5%. At the midpoint of our guidance assumes full year core earnings, conversion of between 30% and 35%. We expect the full year adjusted effective tax rate to be around 17%, we do not anticipate any material discrete items to impact tax in fiscal '22. Our adjusted earnings per share guidance is $10.50 to $11.10. This compares to fiscal '21 adjusted earnings per share of $9.43. At the midpoint of the range, this represents a 15% adjusted earnings per share growth. Also as a reminder, fiscal '21 Q1 included a non-recurring $0.45 gain related to the settlement of a legal matter. Finally, we expect full year fiscal '22 Free Cash Flow conversion of about 90% of adjusted income. This reflects $155 million bonus payout for the fiscal '21 performance. $165 million of capital expenditures and funding higher levels of working capital to support higher sales. Our working capital is targeted to be aligned with our historic amount of about 12% of sale. Corporate and other expense is expected to be around $125 million. Net interest expense for fiscal '22 is expected to be about $115 million. And finally, we're assuming average diluted shares outstanding of about $117.5 million shares. Moving from left to right, core performance is expected to contribute $2.15 this includes the benefit of higher organic sales, we anticipate price realization will exceed input cost inflation by about $0.10. The removal of the onetime accelerated investments made in fiscal year '21 will be about $0.20 benefit the one-time gain from a legal matter that was settled in the prior year is $0.45 headwind. Plex will be a $0.15 tailwind in fiscal '22 including the impact of incremental interest. We expect about a $0.05 impact coming from share dilution and the higher tax rate is expected to be about a $0.75 headwind. Dividend of about $520 million and share repurchases of $100 million. In summary, our guidance assumes a combination of order and backlog growth to drive this team and 0.5% organic sales at the midpoint and reaches the total sales of over $8 billion. We continue to offset inflationary pressures through additional price actions yielding segment margins of 21.5%. We expect adjusted earnings per share growth of 15% and continued strong Free Cash Flow.

Our ARR grew organically by over 18% and including our recent acquisition of Plex now accounts for over 8% of total sales. North America organic sales grew by 16% versus the prior year with strong double-digit growth across all three industry segments. Adjusted earnings per share of $2.33 was better than expected and grew 21% versus the prior year. We expect organic sales growth to be in the range of 14% to 17% and about 15.5% at the midpoint of our range. Our adjusted earnings per share guidance is $10.50 to $11.10.

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Organic sales grew 3%. And recall that we communicated to you in May that customers bought approximately $20 million of product in the fourth quarter of fiscal 2020 due to pre-buying in our construction end markets and favorable weather conditions in our agricultural end market. Absent this dynamic, first quarter organic sales would have increased 8% and non-residential would have been flat year-over-year. We had another strong quarter in the domestic agriculture business, where sales grew 36%. International net sales decreased 9% in the quarter. As you can see on the chart on the screen, our residential end market exposure has increased to 38% of domestic sales, our second largest domestic end market behind non-residential. Organic adjusted EBITDA margin increased 830 basis points, driven by favorable material costs, lower manufacturing and transportation costs driven by our operational initiatives, contributions from the proactive cost mitigation steps announced in March and leverage from the growth in pipe and allied products. We've had roughly 80% of the salaried workforce, including sales, pretty much working from home since late March. Net sales increased 23%, with 3% organic growth plus the contribution of Infiltrator. Within ADS, domestic sales increased 4%, driven by sales growth in both the agriculture and construction end markets. Importantly, sales increased 4% in both pipes and allied products. From a profitability standpoint, our adjusted EBITDA increased $79 million, or 99% compared to the prior year. Our organic adjusted EBITDA increased $38 million, with strong performance from our sales, operations, procurement and distribution teams. Infiltrator contributed an additional $42 million to adjusted EBITDA and has many of the same benefits as ADS in this market environment. We more than doubled our free cash flow in the quarter, increasing from $53 million in the first quarter of fiscal 2020 to $124 million in fiscal 2021. Our working capital as a percent of sales decreased to about 21% as compared to about 25% last year. Our trailing 12-month pro forma leverage ratio is now 1.9 times below our target range of 2 times to 3 times levered we've previously communicated and well ahead of our original target to achieve a leverage ratio of less than 3 times by the end of this calendar year. We ended the quarter in a very favorable liquidity position, with $235 million in cash on June 30, 2020 and $289 million available under our revolving credit facility, bringing our total liquidity to $524 million. Further, we paid down the remaining $50 million balance on our revolving credit facility this past Friday, bringing that balance to zero as of today. Lastly, due to the uncertain market environment, we are not providing guidance on the call today.

Lastly, due to the uncertain market environment, we are not providing guidance on the call today.

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Revenue was $1.28 billion, adjusted EBITDA $292 million and EBITDA margin was 22.8%. The revenue was led by Commercial Aerospace, up 15% year-over-year, and contributing to a total increase of 13%. The company was also able to overcome the challenges once again of the Boeing 787 build rate declines and the supply chain issues limiting commercial truck production, the 787 affecting Fastening Systems and Engineering Structures in particular. Aluminum prices continued the upward surge with aluminum and regional premiums increasing by over $400 per metric ton sequentially and impacting the margin rate by 20 basis points. Adjusted earnings per share, excluding special items, was $0.27, and cash generated in the quarter was $115 million. AR securitization was unchanged at $250 million. On a sequential basis, Third quarter revenue and adjusted EBITDA were up 7% and adjusted earnings per share up 23%. Adjusted free cash flow for the quarter was strong at $115 million, which results in a Q3 year-to-date free cash flow at a record $275 million. The combination of debt actions in the third quarter, combined with our first half results and actions, will reduce annual interest expense by approximately $70 million. In the quarter, we also repurchased approximately 770,000 shares of common stock for $25 million, which increases share repurchases year-to-date to approximately seven million shares for $225 million. The net result of all these actions plus the reinstatement of the common stock dividend and the $115 million cash inflow resulted in a cash balance of $726 million, similar to that at the end of Q2. Lastly, we continue to focus on legacy liabilities and have reduced pension and OPEB liabilities by approximately $180 million year-to-date. Moreover, year-to-date pension and OPEB expenses have reduced by approximately 50% compared to last year. Revenue for the quarter increased 13% year-over-year and 7% sequentially. As expected, Commercial Aerospace was up 15% year-over-year and 16% sequentially, driven by the Engine Products segment and narrow-body aircraft production. commercial transportation, namely Wheels, was up 38% year-over-year. The industrial gas turbine business continues to grow and was up 26% year-over-year and 6% sequentially, driven by new builds and spares. Defense Aerospace was down 11% year-over-year, driven by reductions in the Joint Strike Fighter builds, but was up 3% sequentially from the second quarter. Structural cost reductions have exceeded our annual target of $100 million. Q3 structural cost reductions were $23 million year-over-year and $121 million year-to-date. In the third quarter, Engine Products had an incremental operating margin of approximately 70%, and Forged Wheels had an incremental operating margin of approximately 45%. Fasteners had an operating margin expansion of some 630 basis points, while structures was up 210 basis points. As a result, Howmet's adjusted EBITDA margin expanded a full 800 basis points year-on-year, driven by volume, price and structural cost reductions. Adjusted free cash flow for the quarter was $115 million and year-to-date, $275 million. Lastly, we have lowered our annualized interest cost by $70 million through a combination of paying down debt and refinancing into low-cost debt. Adjusted EBITDA margin for the quarter was 22.8%, representing an 800 basis point improvement compared to the third quarter of 2020. In the quarter, Engine Products added approximately 500 employees net, which now brings the total to 800 net additional employees hired for that segment during the second and third quarters. Third quarter total revenue was up 13% year-over-year and 7% sequentially. Commercial Aerospace increased to 42% of total revenue, which is an improvement sequentially, but far short of pre-COVID levels of 60%. The third quarter marked the start of the Commercial Aerospace recovery, with commercial aerospace revenue up 15% year-over-year and 16% sequentially. Defense Aerospace was down 11% year-over-year, driven by the Joint Strike Fighter and up 3% sequentially. Commercial Transportation, which impacts both the Forged Wheels and Fastening Systems segment was up 38% year-over-year, however, flat sequentially after we adjust for the increase in aluminum prices. Finally, the Industrial and Other Markets, which is composed of IGT, oil and gas and general industrial was up 14% year-over-year and down 2% sequentially. IGT, which makes up approximately 45% of this market continues to be strong and was up a healthy 26% year-over-year and 6% sequentially. As expected, Engine Products year-over-year revenue was 24% higher in the third quarter. Commercial Aerospace was 50% higher, driven by the narrow-body recovery. IGT was 26% higher as demand for cleaner energy continues. Defense Aerospace was down 8% year-over-year, but up 7% sequentially. Incremental margins for Engine Products were approximately 70% for the quarter despite hiring back approximately 500 workers to prepare for future growth. Operating margin improved 1,200 basis points year-over-year. Also as expected, Fastening Systems year-over-year revenue was 6% lower in the third quarter. Commercial Aerospace was 25% lower as we saw continued production declines for the Boeing 787 and customer inventory corrections. The commercial transportation and industrial markets within the Fastening Systems segments were approximately 55% and 19% year-over-year, respectively. Year-over-year Fastening Systems was able to generate $14 million more in operating profit, while revenue declined $17 million. As a result, operating margin improved 630 basis points. Engineered Structures year-over-year revenue was 3% lower in the third quarter. Commercial Aerospace was 13% higher as the narrow-body recovery was partially offset by production declines for the Boeing 787. Defense Aerospace was down 21% year-over-year, but was flat sequentially. Year-over-year, Engineered Structures was able to generate $4 million more in operating profit on $7 million of lower revenue. As a result, operating margin improved 210 basis points. Forged Wheels year-over-year revenue was 34% higher in the third quarter. The segment was able to overcome a 4% decrease in volume due to customer supply chain issues, limiting commercial truck production, and a 13% increase in aluminum prices to maintain a healthy operating margin of approximately 27%. Year-over-year incremental margins for Forged Wheels were approximately 45% for the quarter. First, in the first half of the year, we paid down approximately $835 million of debt by completing the early redemption of our 2021 and 2022 bonds with cash on hand. The annualized interest expense savings with this action is approximately $47 million. Second, in the third quarter we tendered $600 million of our 6.875% notes due in 2025 and issued $700 million of 3% notes due in 2029. The annualized interest expense savings with this action is approximately $20 million. Third, with cash on hand, we repurchased $100 million of our 2021 notes through an open market repurchase in Q3 and in October, which neutralized the gross debt impact of the tender and refinancing. The annualized interest expense saving with this action is approximately $5 million. As a result of these actions, we have lowered annualized interest costs by approximately $70 million and smoothed out our future debt maturities. At the end of Q3, gross debt was approximately $4.2 billion, which is similar to Q2. Net debt to EBITDA improved from 3.5 times in Q2 to 3.2 times despite the deployment of cash for debt refinancing, share buybacks and dividends. Finally, our $1 billion revolving credit facility remains undrawn. Special items for the third quarter were a net charge of approximately $93 million, mainly driven by the costs associated with the bond tender and refinancing completed in the quarter. As expected, Howmet transitioned to revenue growth in the third quarter, and we expect year-over-year revenue growth will continue into the fourth quarter and to 2022, with a growth of approximately 12% in commercial aerospace and total revenue growth in the fourth quarter of approximately 6%. As expected, the Engine Products business began to grow notably in the third quarter. We expect modest sequential growth in Q4 for Engineered Structures despite continued delays with the 787. In terms of specific numbers, we expect the following: In terms of guidance for Q4, I'll just call out the midpoints, as you can read the slide: Revenue, $1.315 billion; EBITDA, $300 million; EBITDA margin, 22.8%; earnings per share of $0.29. And for the year, we expect revenue to be $5 billion, plus or minus; EBITDA at $1.135 billion; EBITDA margin at 22.7%; earnings per share increased to $1 per share; and cash flow of $450 million. Moving to the right-hand side of the slide, we expect the following: Second half revenue to be up approximately 8% versus the first half driven by Commercial Aerospace, Commercial Transportation and IGTT; Q4 sequential segment incremental operating margins, we expect to be in the order of 28%. Price increases will continue to be greater than 2020, the cost-reduction carryover of $100 million, as already commented, is exceeded. Pension and OPEB contributions of approximately $120 million and capex should be in the range of $180 million to $200 million compared to depreciation of approximately $270 million. Adjusted free cash flow compared to net income continues to be approximately 100%. An early approximate total revenue guide would be for an increase in annual revenues of 12% to 15%, led by recovery in Commercial Aerospace. The fourth quarter, for our -- revenue outlook is $30 million higher than the third quarter, with margins of approximately 23%, which sets a platform for a healthy 2022.

Adjusted earnings per share, excluding special items, was $0.27, and cash generated in the quarter was $115 million. Third quarter total revenue was up 13% year-over-year and 7% sequentially. As expected, Howmet transitioned to revenue growth in the third quarter, and we expect year-over-year revenue growth will continue into the fourth quarter and to 2022, with a growth of approximately 12% in commercial aerospace and total revenue growth in the fourth quarter of approximately 6%. As expected, the Engine Products business began to grow notably in the third quarter.

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Last night we reported a loss of $1.11 in adjusted operating earnings per share which included pre-tax $500 million in COVID 19 impacts, or $5.59 per share. Our 12 month trailing ROE was 2.1%, which included 9.8% in COVID 19 impacts. Premium growth was strong at 9.5% and we ended the quarter with excess capital of $1 billion. In the US individual mortality business, COVID 19 claims were $235 million in the quarter, slightly above the high end of our rules of thumb range. COVID 19 claims in India and South Africa were $161 million and $64 million respectively as those countries also experienced a material delta wave, and Jonathan will provide further insights on our claims shortly. The highlights this quarter include strong earnings across all lines and regions from our GFS business, deployment of $140 million of capital into in-force transactions, including our largest to date longevity transaction in the Netherlands. This brings the year-to-date capital deployment into in-force transactions to a total of $440 million putting us on track for a very strong year as our pipelines remain very good with opportunities in all regions. That business has grown from a relatively small base a few years ago, the one that has produced $66 million of adjusted operating income through the first nine months of this year. RGA reported a pre-tax adjusted operating loss of $89 million for the quarter and adjusted operating earnings per share loss of $1.11 per share which includes a negative COVID 19 impact of $5.59 per share. Our trailing 12 months adjusted ROE was 2.1% which is net of COVID impacts of 9.8%. While we did experience a significant level of COVID 19 impacts, our underlying non-COVID 19 results were strong as demonstrated by the year-to-date growth in our book value per share excluding AOCI of 4% to $137.60. I would highlight this growth in book value per share is after absorbing approximately $1 billion pre-tax of COVID 19 claim costs. Consolidated reported premiums increased 9.5% in the quarter, or 7.7% on a constant currency basis. The effective tax rate for the quarter was 15.2% on pre-tax adjusted operating loss below our expected range of 23% to 24% primarily due to adjusted operating income and higher tax jurisdictions and losses in tax jurisdictions, for which we did not receive a tax benefit. We saw non COVID 19 excess claims of approximately $75 million, which is consistent with higher non-COVID 19 population mortality as per CDC reporting. The US Group and individual Health business both performed better than our expectations due to favorable experience overall, even after reflecting $15 million of COVID 19 claims in our US Group lines of business. The Canada Traditional segment results reflected favorable experience in the group and creditor lines of business, slightly offset by COVID 19 claim costs in individual life -- line of approximately $5 million. In the Europe, Middle East and Africa segment, the Traditional business results reflected COVID 19 claim cost of $80 million in total, of which $64 million was in South Africa, and $13 million in the U.K. EMEA's Financial Solutions had a good quarter as business results reflected favorable longevity experience, $4 million attributable to COVID 19. Turning to our Asia Pacific Traditional business, Asia results reflect COVID 19 claim cost of $169 million of which $161 million was in India. The Corporate and Other segment reported pre-tax adjusted operating loss of $27 million, which is in line with our quarterly average run rate. Moving on to investments, the non-spread portfolio yield for the quarter was 4.95%, reflecting both our well-diversified portfolio allocation and strong variable investment income primarily due to realizations from limited partnerships and real estate joint ventures. Our new money rate increased to 3.7% with the majority of purchases in public investment grade assets and contributions from strong private asset production. Regarding capital management, our excess capital position at the end of the quarter was approximately $1 billion. We deployed $140 million into in-force transactions and repurchased $46 million of shares. Additionally, we entered into an asset intensive retrocession transaction that generated $94 million of capital and enhanced our returns. COVID 19 deaths under the age of 65, ages where there is more life insurance exposure were at their highest points over the past six quarters. COVID 19 claim costs were $235 million in the quarter, slightly above the higher end of our rule of thumb. Q3 results reflect higher mortality in ages under 65 and larger average claim sizes. Turning to markets other than US individual mortality COVID 19 claim costs of $161 million in India were higher than our prior estimates, reflecting the more adverse impact of the Q2 delta wave. $30 million of this impact in the quarter relates to an increase in IBNR, resulting in a COVID specific IBNR balance for India of $75 million at the end of the quarter. COVID 19 claim costs in South Africa are estimated at $64 million in the quarter, reflecting a change in the distribution of general population deaths by province, as well as some large claims volatility. Other markets including Canada and the U.K. accounted for $30 million of estimated COVID 19 claim costs. We are maintaining our claim cost rule of thumb of $10 million to $20 million for every 10,000 general population deaths.

Last night we reported a loss of $1.11 in adjusted operating earnings per share which included pre-tax $500 million in COVID 19 impacts, or $5.59 per share. RGA reported a pre-tax adjusted operating loss of $89 million for the quarter and adjusted operating earnings per share loss of $1.11 per share which includes a negative COVID 19 impact of $5.59 per share.

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We also use non-GAAP financial measures, so it's important to review our GAAP results on page 3 and use the information about these measures and their reconciliation to GAAP in the appendix. Overall, our fees were up 28% year-on-year and 19% sequential quarter. With stable net interest income, total revenue was up 7% year-on-year and 6% sequential quarter. We did a good job on expenses, which resulted in 5.9% positive operating leverage year-on-year, up 54.9% underlying efficiency ratio and PPNR growth of 15% year-on-year. [Indecipherable] charge-offs as our credit cost in Q2 we had a record quarterly earnings of $1.14. Our ACL to loans ratio is now 2.01% and that's 2.09% excluding PPP loans. The strong PPNR generation and reduction in commercial line draws during the quarter helped improve our CET1 ratio to 9.6%, which is up from 9.4% in the first quarter. We had a very liquid balance sheet during the quarter with average deposit growth of 12% sequential quarter, 8% spot. Our spot LDR at quarter-end was 87.5% or 84.5% excluding PPP loans. The resilience of the franchises is on display as we generated $0.55 of earnings per share on an underlying basis. Net interest income was stable linked quarter given strong loan growth which offset a 22 basis point decline in margin. We increased our allowance for credit losses to $2.5 billion, which translates to an ACL coverage ratio of 2.09% ex PPP, up from 1.73% last quarter. We showed excellent balance sheet strength and in the quarter with a stronger CET1 ratio of 9.6%, up 20 basis points linked quarter. Our liquidity ratio has also improved as we ended the quarter with an LDR of 84% excluding PPP loans and we remain in compliance with the LCR. Also, our tangible book value per share is over $32 at quarter end, up 4% compared with a year ago. Now, let me move to the highlights of our underlying results covered on pages 4 and 5. Our earnings per share of $0.55 was down $0.41 year-over-year but up $0.46 linked quarter. PPNR of $790 million was a record, up 15% year-over-year and 17% linked quarter. Average loan growth was 6% in the quarter, reflecting PPP lending and the impact of the commercial line draws we saw last quarter, which benefited NII and helped offset the impact of the more challenging rate environment. If we adjust for the sales, PPP and line draws, average loans were up 1% linked quarter. Moving to page 6, I'll cover net interest income, which are quite well despite a lower margin. Net interest income was stable linked quarter as the benefit of 8% interest earning asset growth and improved funding costs was offset by the impact of lower rates. Net interest margin decreased 22 basis points linked quarter as the impact of lower rates and higher cash balances was partially offset by lower deposit costs and outsized growth in DDA and other lower cost deposits. About 6 basis points of the margin decline related to higher cash balances in the quarter given strong deposit flows as consumers and small businesses benefited from government stimulus and corporate clients built liquidity. We were especially pleased with our progress on deposit cost, which we drove down 37 basis points during the quarter, a more than 50% decline. Our total interest-bearing deposit cost was 48 basis points at the end of the quarter. That compares to 34 basis points back in 3Q 2015 at the end of the last [Indecipherable] period. Moving to page 7, I'll discuss fees, which really shows the benefit from the work we've done to build capabilities and diversify our business. Noninterest income was a record, up 19% on a linked quarter basis and 28% year-over-year. On a sequential basis mortgage banking fees increased by 74% to $276 million reflecting continued strong refi lock volumes and record high gain on sale margins in particular. Capital market fees of $61 million, increased $18 million from first quarter reflecting strong DCM activity and a $13 million mark-to-market recovery on loan trading assets. Foreign exchange and interest rate product revenues increased 5% linked quarter before the impact of CVA. CVA improvement was $8 million in the quarter. Trust and investment services fees were lower by $8 million linked quarter given the rate environment and the effect of the equity market decline on managed money revenue. On a positive note, we see debit card activity roughly back to pre-pandemic level and credit card activity in June only down about 10% compared with last year, a significant improvement from the over 30% declines we saw in early April. Turning to page 8, underlying non-interest expense declined 2% linked quarter largely driven by seasonal impacts in Q1 on salaries and employee benefits. Salaries and employee benefits declined $30 million or 6% linked quarter largely reflecting seasonally lower payroll taxes. Next, let's discuss loan trends on page 9. Average core loans were up 7% linked quarter primarily driven by the full quarter impact of the commercial line draws at the end of the first quarter and the $4.7 billion of PPP lending to our small business customers. Before the impact of loan sales, line draws and PPP loans, core commercial loan growth was up approximately 1% linked quarter. The $7.2 billion of post-COVID commercial line draws in March have been substantially repaid, and were down to $1.8 billion by the end of the second quarter. Overall utilization is down to approximately 40% from 50% at the end of the first quarter. Core retail loans on a linked quarter basis were stable with growth in education and other retail offset by lower home equity balances and the transfer of approximately $900 million of education loans held for sale. Moving to page 10, deposit growth was exceptionally strong in the quarter. We saw robust average deposit growth of 12% linked quarter and 15 % year-over-year, outpacing loan growth and driving our average LDR down to 89% excluding PPP as consumers and small businesses benefited from government stimulus and clients built liquidity. These strong deposit flows came in lower cost categories with average DDA growth up 25% on a linked quarter basis and 33% year-over-year. We were able to cut our interest-bearing deposit costs by roughly half this quarter, down 46 basis points to 48 basis points, and down 82 basis points year-over-year. Let's move to page 11 and cover credit. Net charge-offs were stable at 46 basis points linked quarter as increases in commercial were partially offset by improvement in retail reflecting the impact of forbearance. Non-performing loans increased 27% linked quarter driven by $192 million increase in commercial, reflecting COVID lockdown impacts and an $18 million increase in retail. The non-performing loan ratio of 79 basis point increased 18 basis point linked quarter and 17 basis points year-over-year. However, in spite of this increase the non-accrual coverage ratio remained strong at 255% at June 30. We increased our CECL credit reserve coverage ratio from 1.73% in 1Q to 2.09% in 2Q excluding the PPP loans. This 46 basis points increase was primarily driven by a net reserve build of $317 million. In addition, approximately $100 million of reserves associated with a planned sale of student loans were reallocated to the remaining loan portfolio. In effect the reserve build was $417 million or 99% of the Q1 build. On page 12, we provide detail on customer forbearance and the PPP lending program. The average FICO score of our retail forbearance customers remains high at 725. And approximately 93% of these loans were current when they entered forbearance. I'm also pleased to say that through June 30, our customers received $4.7 billion in PPP loans, which has allowed us to help support over 540,000 jobs. 84% of loans made were below $100,000. Moving to page 13 to discuss our CECL methodology and reserves; we have summarized the key aspects of our macroeconomic scenario, which is a foundational element of the CECL reserve estimate. On page 14, as I mentioned earlier, we feel well positioned to manage through the current environment with strong capital and liquidity positions. Our CET1 ratio improved to 9.6%, up 20 basis points linked quarter given our strong results and a reduction in risk-weighted assets. Additionally, during the quarter, we issued 400 million of Q1 qualifying preferred stocks, which in combination with the increase in CET1 drove a 40 basis point increase in Tier 1 capital. Strong deposit growth outpaced loan growth, which improved our liquidity metrics and drove the spot LDR excluding PPP loans down to 84%. Turning to page 15, let's look at reserves and capital versus stress losses. Our ACL of $2.5 billion represents a very strong 52%% of our modeled losses using the Fed scenario and is now 38% of the stress losses in the Fed's 2020 DFAST. In addition, when adding excess capital above our preliminary SCB of $3.4 billion to our ACL, the resulting $5.9 billion is 120% of our estimate and 88% of the Fed loss estimates. On average, we've generated approximately 35 basis points of CET1 capacity per quarter over the last six quarters. On page 16, we show a summary of the Fed's stress test results. The Fed estimated our PPNR at 2.3% of average assets, which is well below the peer median of 3.3%. For example, our PPNR to assets for 2019 has improved by approximately 37% since the IPO to 3.7%. Importantly, this compares to a stable 3.7% in actual PPNR to assets during the first six months realized stress in 2020. The Fed's estimate of our credit losses at 5.6% was right on top of the peer median and down from 6.1% in 2018. However, our estimated company run severely adverse credit loss rate of 4.2% is significantly lower. We believe that the Fed's modeled results and the 3.4% preliminary SCB is elevated above what our business model would imply. On page 17, I want to highlight some exciting things that are happening across the company. Moving to page 18, we provide some commentary on how key categories are shaping up for full year 2020 compared to the prior year. Now, let's move to page 19 for some high-level commentary on the third quarter.

With stable net interest income, total revenue was up 7% year-on-year and 6% sequential quarter. This 46 basis points increase was primarily driven by a net reserve build of $317 million.

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In combination, top line growth and margin expansion helped drive higher earnings per share of $1.82. This is an increase of 36% over the prior year's third quarter adjusted earnings of $1.34 per share. Inclusive of these strong third quarter numbers through the first 9 months of 2021, our home sale revenues were up 22% to $9.2 billion while our reported earnings per share are up 36% to $4.85. More specifically, consistent with our constructive view on the housing market, we have invested $2.9 billion in land acquisition and development so far this year. Our $2.9 billion of land spend is comparable to what we invested for the full year in both 2020 and in the pre-pandemic year of 2019, and we remain fully on track to invest approximately $4 billion in total for the full year of 2021. At the end of the third quarter, our lots under option had grown to 54% of our total controlled lot position compared to when I set the initial 50% option target, we have over 65,000 more lots under option and now view 50% as the floor rather than the ceiling in terms of how we control our land assets. Consistent with our capital allocation priorities, along with investing $948 million more in land acquisition and development through the first 9 months of 2021 compared with last year, we have also returned $726 million to shareholders through share repurchases and dividends and have paid off nearly $800 million in debt this year, leaving us with a net debt-to-capital ratio of only 5.7%. Finally, consistent with our strategic focus, our operating and financial performance has helped drive a return on equity of 26% for the trailing 12 months. On the other hand, our results have certainly benefited from the remarkable demand and pricing environment the homebuilding industry has experienced over the past 18 months. For others, it's changing lead times where order fulfillment has gone from 6 weeks to 16 weeks, back to 11 weeks and then back to 16 weeks. Our home sale revenues for the third quarter increased 18% over last year to $3.3 billion. The increase in revenues was driven by a 9% increase in closings to 7,007 homes in combination with an 8% or $37,000 increase in average sales price to $474,000. The higher average sales price realized in the third quarter reflects meaningful price increases we've realized across all buyer groups, with first-time up 8%, move-up up 10% and active adult up 8%. The mix of homes we delivered in the third quarter included 32% from first-time buyers, 44% from move-up buyers and 24% from active adult buyers. In last year's third quarter, 30% of homes delivered were first-time, 45% were move-up and 25% were active adult. Our net new orders for the third quarter were 6,796 homes, which represents a 17% decrease from last year that was driven primarily by a 14% decline in year-over-year community count. Our orders from first-time buyers decreased 20% compared with last year. This decrease was driven primarily by our actions to restrict sales as our first-time community count was only down 6% compared with last year. In contrast, our orders from move-up and active adult buyers decreased 22% and 4%, respectively, which was driven by comparable 22% and 5% decreases in community count, respectively. In the third quarter, we operated from an average of 768 communities. Consistent with the guide in our recent market update, this is down 14% from last year's average of 892 communities. Our Q3 community count should be the low watermark for the year as we expect our fourth quarter community count to increase to approximately 775 active communities. Our unit backlog at the end of the third quarter was up 33% over last year to 19,845 homes. The dollar value of our backlog increased an even greater 56% to $10.3 billion as we benefited from robust price increases realized over the course of this year. At the end of the third quarter, we had 18,802 homes under construction, of which 83% were sold and 17% respec. We have almost 900 more spec homes in production than we did in the second quarter as we have been working to increase spec availability, particularly in our Centex communities. Given that 90% of our specs are early in the construction cycle and we have only 109 finished specs, these units are about helping to position the company for 2022, rather than providing closings in 2021. We faced similar dynamics within our production of sold units as 2/3 of these homes are in the earlier stages of construction, and we can see gaps in the supply of key building products needed to complete these homes. Given these conditions, we believe it appropriate to update our fourth quarter guide for expected fourth quarter deliveries and currently expect to deliver approximately 8,500 homes in the fourth quarter, which would represent an increase of 24% over the fourth quarter of last year. Reflective of these conditions, our average price in backlog increased 18% or $78,000 over last year to $519,000. Although more than half of our quarter end backlog is expected to deliver in 2022, we will continue to see the benefit of rising prices in our fourth quarter as our average closing price is expected to be $485,000 to $490,000. At the midpoint, this would represent an increase of approximately 10% over last year. Our reported homebuilding gross margin in the third quarter increased 200 basis points over last year to 26.5%. Given that our third quarter closings absorbed the elevated lumber prices from earlier this year, expanding our gross margin by 200 basis points attest to the strong pricing environment the industry experienced over the past year. It's worth noting that the strong market conditions also contributed to another step down in incentives in the period as discounts fell to 1.3%. This is down from 3% last year and down 60 basis points from the second quarter of this year. That said, with the changing mix of homes we currently expect to close in the fourth quarter, coupled with the added material, labor and logistics costs we're paying to get homes closed, we currently expect our fourth quarter gross margin to be 26.6% or 26.7%. This would represent an increase of 160 to 170 basis points over last year's fourth quarter and an increase of 10 to 20 basis points over the third quarter of this year. Our SG&A expense for the third quarter was $321 million or 9.6% of home sale revenues. Prior year SG&A expense for the period was $271 million for a comparable 9.6% home sale revenues. Given there's still increase in closings, we expect [Technical Issues] in the upcoming quarter expected to fall to a range of 8.9% to 9.2% of home sale revenues. Our third quarter pre-tax income was $49 million versus $64 million last year. The company's reported tax expense in the third quarter was $145 million, for an effective tax rate of 23.3%. In the comparable prior year period, our effective rate was 14% as we realized a tax benefit of $53 million associated with energy tax credits recognized in the period. For the third quarter, our reported net income was $476 million or $1.82 per share. This compares with prior year adjusted net income, excluding the impact of the energy tax credits, of $363 million or $1.34 per share. Our business continues to generate strong cash flow, which allowed us to end the quarter with $1.6 billion of cash after significant investment in the business and continued shareholder distributions in the quarter. In the quarter, we repurchased 5.1 million shares or about 2% of our outstanding common shares for $261 million at an average price of $51.07 per share. The $261 million in stock repurchase is a sequential increase of $61 million from the second quarter of this year. We also invested $1.1 billion in land acquisition and development in the third quarter. This brings our total land-related spend in 2021 to $2.9 billion and keeps us on track to invest approximately $4 billion of land acquisition and development for the year, which would be an increase of almost 40% over last year. We ended the third quarter with a debt-to-capital ratio of 22.4%, which is down from 29.5% at the end of last year. Adjusting for our cash position, our net debt-to-capital ratio at the end of the quarter was 5.7%. We ended the third quarter with approximately 223,000 lots under control, of which 54% were controlled through options. The most typical increase in the quarter was in the range of 1% to 3%, although some of our divisions were able to push pricing in select communities a little more aggressively. We continue to see a very strong financial profile among our homebuyers with the average FICO score remaining above 7 50 and loan-to-value of 83% based on users of our mortgage company.

In combination, top line growth and margin expansion helped drive higher earnings per share of $1.82. Our home sale revenues for the third quarter increased 18% over last year to $3.3 billion. Our unit backlog at the end of the third quarter was up 33% over last year to 19,845 homes. The dollar value of our backlog increased an even greater 56% to $10.3 billion as we benefited from robust price increases realized over the course of this year. For the third quarter, our reported net income was $476 million or $1.82 per share.

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On a US GAAP basis, for the fourth quarter of 2020, NOV reported revenues of $1.33 billion and a net loss of $347 million. Consolidated revenue declined 4% sequentially and EBITDA fell to $17 million to 1.3% of sales in the fourth quarter. The offshore rig count was down 37% from the fourth quarter of 2019 and the international rig count was down 40% year-over-year. Although North America drilling has been improving since bottoming in August, it is still down 58% compared to the prior year which, by the way, wasn't exactly a robust oil and gas market either. While we were pleased to see Rig Technologies' reported book to bill above 1 in the fourth quarter, that is the only book to bill NOV saw above 100% throughout 2020. All three of our segments saw the majority of their revenue come from markets outside North America: 59% for Wellbore Technologies, 67% for Completion & Production Solutions, and 90% for Rig Technologies. I'm proud that NOV was able to take out $700 million in fixed costs during 2020, but our poor fourth quarter results tell us that we must do more. As we enter 2021, we've identified another $75 million in annual cost reductions that we are executing on right now, and we expect the target to grow as we progress through the year. Fourth quarter cash flow from operations was $186 million and free cash flow was $133 million. For the year, NOV generated cash flow from operations of $926 million and reduced our net debt by almost $700 million. We completed the year with a very strong balance sheet, only $142 million in net debt, with our next major maturity not due until late 2009. We remain committed to developing and delivering solutions that provide the world with abundant reliable safe energy, the oil and gas, that powers the world's global food supply chain, that powers 100% of its air travel and that helps lift humanity out of poverty. NOV is proud to support this critical industry as we've done 159 years. You may be surprised to learn that robust serious technical economic discussions about transitioning to new forms of energy actually began more than 40 years ago, following the Iranian hostage crisis and the second big oil shock of the 1970s. In 2019, NOV invested in Keystone Tower Systems, a start-up that has developed a patented tapered spiral welding process that enables the automated production of wind tower sections, which can significantly decrease production times and reduce cost by 50% or more. Keystone is currently completing construction of its first commercial line within NOV's Pampa, Texas facility and has an order for 100 tower sections from a major wind turbine manufacturer. This has led the Global Wind Energy Council to forecast 26% compound annual growth rate for the offshore wind space through this decade. Considering nearly 40% of the world's population, 2.5 billion people, live and consume power within 60 miles of the coast, this makes sense. NOV has long been a leader in offshore wind construction vessels, on which we can sell as much as $80 million of equipment. In fact, the majority of the world's 30 gigawatts of installed offshore power generation capacity was put in place with NOV-designed vessels and NOV-supplied equipment. By year-end, I expect that our business in this area will have doubled to more than $200 million annually, and further growth prospects are excellent as the 9.6 gigawatts of offshore wind capacity to be installed in 2021 is forecast to more than double by 2025 to more than 21 gigawatts. With revenue potential north of $25 million per vessel and dozens of vessels required to develop a single gigawatt project, NOV's total addressable market in this area is potentially in the billions. We have a large and growing base of installed capacity in the fixed offshore wind installation vessel market, which we expect to exceed $200 million annually in revenue for us by year-end, along with an ongoing aftermarket opportunity. Our Keystone team secured an order for 100 towers based on its proprietary technology that we are constructing in our plant in Texas. NOV's consolidated revenue fell $57 million or 4% sequentially to $1.33 billion during the fourth quarter of 2020. Our shorter cycle businesses capitalized on improving drilling activity levels in the US to drive 4% revenue growth in North America, despite very light demand for capital equipment sales. International revenue declined 7%, reflecting the different trajectories of rig activity between the eastern and western hemispheres during the quarter. EBITDA for the fourth quarter was $17 million, or 1.3% of sales. While we exceeded our $700 million cost-out initiative target in the third quarter of 2020, our efforts to right-size and improve the efficiencies of the organization continued during the fourth quarter. As Clay mentioned, we've identified and are executing on $75 million in additional cost savings initiatives that we expect to complete by year-end 2021, and we expect our target will grow. During the fourth quarter, we generated $186 million in cash flow from operations and $133 million in free cash flow. We ended the year with approximately $1.69 billion in cash and $1.83 billion in gross debt, resulting in a net debt balance of only $142 million, down $676 million year-over-year. For the full year, cash flow from operations was $926 million and free cash flow totaled $700 million. The organization's focus on reducing costs, improving capital efficiency and optimizing cash flow allowed us to reduce net debt by 83% during 2020, further improving what was already a rock-solid balance sheet. For 2021, we expect to report capital expenditures of approximately $215 million with $82 million of that amount related to completing our rig manufacturing facility in Saudi Arabia. Factoring in the 30% that will be funded by our JV partner, net capex will total $190 million. Our Wellbore Technologies segment generated revenue of $373 million in the fourth quarter, an increase of $12 million or 3% sequentially. Despite the top line growth, EBITDA fell to $12 million or 3.2% of sales, primarily due to an unfavorable shift in product mix and COVID-19-induced shipping cost overruns and delays. Our Grant Prideco drill pipe business realized a 24% sequential decline in revenue with very high decremental margins. Lower volumes, a significant decrease in proportion of higher-margin large-diameter pipe and extra costs associated with shipping delays in Asia more than offset the unit's cost reduction efforts, which included reducing its workforce by approximately 25% during the first week of the quarter. Orders improved 84% off the all-time low level realized in the third quarter but were less than half the level achieved in Q4 of 2019. Our Tuboscope pipe coating and inspection business realized a 7% sequential improvement in revenue, led by a 28% increase in our activity from the OCTG market. Our downhole tools business saw a 5% sequential increase in revenue, driven by the improving North American rig count, which was partially offset by lower activity in the eastern hemisphere. During the fourth quarter, we saw a significant increase in the number of runs completed by our SelectShift downhole adjustable motor, which now incorporates our latest ERT power section, allowing for up to 1,000 horsepower to be delivered to the drill bit, further enhancing the motor's ability to drill single run horizontal wells. A major national oil company in the Middle East recently completed a 12.25 inch directional section using our Agitator tool, resulting in a 38% improvement in the rate of penetration relative to nearby offsets. Our Wellsite Services business generated 17% sequential growth in revenue during the fourth quarter on the meaningful improvement of drilling activity levels across the western hemisphere. We also expect an improved mix in product sales and cost controls to result in EBITDA margins expanding approximately 200 basis points to 400 basis points. Our Completion & Production Solutions segment generated $546 million in revenue during the fourth quarter, a decrease of $55 million or 9% sequentially. While orders did improve 27% sequentially to $15 million, the resurgence of COVID-19 through the quarter reduced customer conviction, slowed order intake and led to the segment's fourth straight quarter with a book to bill below 1. Further deterioration of the segment's backlog created additional absorption challenges and a less favorable product mix, resulting in an EBITDA that declined $35 million to $28 million or 5.1% of sales. Our subsea flexible pipe business saw revenue decline of 11% sequentially with high decremental margins. Our Process and Flow Technologies business experienced a 4% sequential revenue decline, primarily due to deterioration in the backlog of our APL turret loading offerings, which is facing similar challenges to what I just described in our subsea business. Or fiberglass systems business saw revenue decline approximately 19% sequentially due to customers that continue to defer deliveries for offshore scrubbers and limited demand from midstream infrastructure, which has depleted our backlog for large diameter, high pressure pipe. Or Intervention and Stimulation Equipment business realized a 9% sequential decline in the four quarter. In Q4, we realized our second quarter in a row of improving demand for replacement coiled tubing strings, and we are engaging in a steadily increasing number of conversations with customers looking to refurbish or upgrade pressure pumping equipment from Tier 2 to Tier 4 motors with dual fuel capabilities. We recently received an order from a customer to refurbish 35 pressure pumping units. For the first quarter of 2021, we anticipate revenue from our Completion & Production Solutions segment will decline 6% to 10% sequentially with decremental margins in the mid-30% range. Our Rig Technologies segment generated revenues of $437 million in the fourth quarter, a decrease of $12 million or 3% sequentially. Revenue from capital equipment sales declined 7%, partially offset by an increase in aftermarket services. EBITDA declined to $19 million or 4.3% of sales. Additionally, the segment incurred extra expenses associated with the logistical challenges of moving 200 service technicians and associated equipment across numerous international borders during a second round of pandemic-related restrictions. Orders for the segment increased $133 million sequentially off the all-time low realized in the third quarter to $190 million, yielding a book to bill of 105%. And in Q4, we received an order from a customer in the Middle East for two 1,000 horsepower land rigs, fully equipped with automated pipe handling systems, NOVOS drilling automation and our Maestro Power Management system.

On a US GAAP basis, for the fourth quarter of 2020, NOV reported revenues of $1.33 billion and a net loss of $347 million. NOV's consolidated revenue fell $57 million or 4% sequentially to $1.33 billion during the fourth quarter of 2020. We ended the year with approximately $1.69 billion in cash and $1.83 billion in gross debt, resulting in a net debt balance of only $142 million, down $676 million year-over-year. Factoring in the 30% that will be funded by our JV partner, net capex will total $190 million. Our Completion & Production Solutions segment generated $546 million in revenue during the fourth quarter, a decrease of $55 million or 9% sequentially. While orders did improve 27% sequentially to $15 million, the resurgence of COVID-19 through the quarter reduced customer conviction, slowed order intake and led to the segment's fourth straight quarter with a book to bill below 1. Orders for the segment increased $133 million sequentially off the all-time low realized in the third quarter to $190 million, yielding a book to bill of 105%.

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IDACORP's 2021 first quarter earnings per diluted share were $0.89, an increase of $0.15 per share from last year's first quarter. Today, we also affirmed our full year 2021 IDACORP earnings guidance to be in the range of $4.60 to $4.80 per diluted share, with our expectation that Idaho Power will not need to utilize in 2021 any of the additional tax credits that are available to support earnings in Idaho under its regulatory settlement stipulation. In March alone, we saw an annualized customer growth rate of 3.5%. Unemployment within Idaho Power's service area is now down to 3.7%, remaining well below the 6% rate reported at the national level, and total employment in our service area declined a modest 0.3% since March of last year. The Moody's forecast now calls for growth of 8% in 2021, 8.1% in 2022 and continued strong growth of 6.8% in 2023. Last quarter, we stated Idaho Power does not plan to file a general rate case in Idaho or Oregon in the next 12 months. That remains true today as we look at the next 12 months. As a reminder, we expect to spend approximately $47 million in incremental O&M and $35 million in incremental capital expenses for wildfire-related infrastructure work over the next five years. Altogether, IDACORP's first quarter 2021 net income was higher by $7.3 million. On the table of quarter-over-quarter changes, you'll see customer growth added $3.7 million to operating income. Lower usage per commercial customer down 2%, partly due to COVID-19 impact, was largely offset by higher residential usage due to colder weather this year versus last. The net result was a relatively modest $1.3 million decrease in overall usage per customer. The next change on the table shows that transmission wheeling-related revenues increased $4.1 million. This was partly due to a 20% increase in wheeling volumes as well as a 10% increase in Idaho Power's open access transmission tariff rate last October to reflect higher transmission costs. Next on the table, other operating and maintenance expenses decreased by $4.2 million. Finally, our higher pre-tax earnings led to an increase in income tax expense of $1.5 million this quarter. The changes collectively resulted in an increase to Idaho Power's net income of $7.6 million. Cash flows from operations were about $50 million higher than last year's first quarter. We continue to expect IDACORP's 2021 earnings to be in the range of $4.60 to $4.80 per diluted share as we assume normal weather and operating conditions for the remaining nine months of the year. Our expected full year O&M expense guidance remains in the range of the $345 million to $355 million, so we're off to a good start. We also affirm our capital expenditures forecast for this year, which we increased a bit in February to the range of $320 million to $330 million. Our expectation of hydro generation has softened somewhat given the conditions Lisa presented earlier and is now expected to be in the range of 5.5 million to 7.5 million megawatt hours.

IDACORP's 2021 first quarter earnings per diluted share were $0.89, an increase of $0.15 per share from last year's first quarter. Today, we also affirmed our full year 2021 IDACORP earnings guidance to be in the range of $4.60 to $4.80 per diluted share, with our expectation that Idaho Power will not need to utilize in 2021 any of the additional tax credits that are available to support earnings in Idaho under its regulatory settlement stipulation. We continue to expect IDACORP's 2021 earnings to be in the range of $4.60 to $4.80 per diluted share as we assume normal weather and operating conditions for the remaining nine months of the year.

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For us, this reduced GAAP earnings in Q4 by $63 million. We've received one $1.7 billion in cash under our hedge contracts since their inception more than five years ago. For the fourth quarter, sales were $3.3 billion, up 11% sequentially, and 17% year over year. Our operating margin expanded 500 basis points year over year to 19.4%. Operating income grew 18% sequentially and 58% year over year. EPS of $0.52 cents was up 21% sequentially and 13% year over year. We generated $464 million of free cash flow in the fourth quarter, $948 million for the full year, and we finished the year with $2.7 billion in cash on our balance sheet. Our sales were down 12% in the first half as most economies were impacted by pandemic-related lockdowns. But in the second half, we improved sales 24% over the first, while growing operating income, 122%, returning to year-over-year growth and generating very strong free cash flow. For the year, we generated almost $1 billion of free cash flow and our balance sheet remains very strong. At the top were specialty materials with sales up 20% year over year, and environmental technologies up 19% year over year, both significantly outperforming their end markets. In the range of $100 per car in Corning content, we're collaborating with more OEMs and we're offering more solutions to help move the industry forward. And we continue to see strong adoption of our technology by auto OEMs. Our recent proof point is the new Mercedes-Benz Hyperscreen dashboard display, which features a Gorilla Glass cover nearly 5 feet wide. We're well on our way to building a $0.5 billion business. Soon after, we were awarded $204 million in funding from the U.S. government to substantially expand domestic manufacturing capacity for Valor vials. We produce millions of Valor vials and shipped enough for more than 100 million doses, supporting multiple vaccine developers. We received $15 million from the U.S. government to expand domestic capacity for robotic pipette tips which are used for COVID diagnostic testing. I noted that specialty materials sales were up 20% year over year in Quarter 4. They were up 18% for the full year in a smartphone market that declined 7%. Operators can actually save up to $500 per terminal location, dramatically lowering installation cost and speeding up deployment. 75-inch sets were up more than 60% for the full year. Large TVs are most efficiently made on Gen 10.5 plants. Corning is well-positioned to capture that growth with its Gen 10.5 plants in China including the two newest Gen 10.5 facilities in Wuhan and Guangzhou, which are now expanding production to meet customer demand. In the fourth quarter, we grew sales 11% sequentially and 17% year over year to $3.3 billion, exceeding expectations. Excluding the consolidation of Hemlock Semiconductor, sales grew 11% year over year, with every segment growing sales and net income. Specialty materials and environmental technologies deli -- delivered particularly strong year-over-year sales growth, up 20% and 19%, respectively, both outperforming their underlying markets. Our operating margin was 19.4%. That is an improvement of 500 basis points on a year-over-year basis. We grew operating income 18% sequentially and 58% year over year. EPS of $0.52 was up 21% sequentially and 13% year over year. We generated $464 million of free cash flow in the quarter. Cumulative free cash flow for the full year was $948 million. We ended the year with a cash balance of $2.7 billion. In display technologies, fourth-quarter sales were $841 million, up 2% sequentially and 6% year over year. And net income was $217 million, up 11% sequentially and 21% year over year. Display's full-year sales were $3.2 billion, and net income was $717 million. We remain confident that large-size TVs will continue to grow, and we are well-positioned to capture that growth with Gen 10.5, which is the most efficient gen size for large TV manufacturing. In optical communications, fourth-quarter sales were $976 million, up 8% year over year and 7% sequentially. Fourth-quarter core net income of $141 million was up 127% year over year, and 23% sequentially. In environmental technologies, fourth-quarter sales were $445 million, up 19% year over year and 17% sequentially, ahead of expectations as markets continue to improve and GPF adoptions continued in China. Net income was $93 million, up 45% year over year and 35% sequentially, driven by strong operational performance globally and successful ramping of additional GPF capacity in China. For the full year, sales were $1.4 billion and our performance was better than the underlying market. Net income was $197 million. We are ahead of our original timeframe to build a $500 million GPF business. Q4 sales of $545 million were up 20% year over year, full-year sales were $1.9 billion, up 18% year over year, despite a 7% decline in the smartphone market, driven by strong demand for our premium cover materials and our other innovations. Net income was $423 million, up 40% from 2019 on higher sales volume and strong cost performance. Life sciences fourth-quarter sales were $274 million, up 7% year over year and 23% sequentially, driven by strong demand for COVID-related products, including bioproduction products used in clinical trials. Net income was $42 million, up 11% year over year and 50% sequentially. We strengthened our balance sheet, established growth in the second half, and generated a free cash flow of $948 million for the year. As we look ahead, we have strong momentum coming into 2021 and expect year-over-year growth to accelerate in the first quarter. Specifically, we expect core sales of $3.0 billion to $3.2 billion, compared to $2.5 billion in the first quarter last year, and earnings per share of $0.40 to $0.44, which is double last year's first-quarter earnings per share at the low end of the range.

For the fourth quarter, sales were $3.3 billion, up 11% sequentially, and 17% year over year. EPS of $0.52 cents was up 21% sequentially and 13% year over year. In the fourth quarter, we grew sales 11% sequentially and 17% year over year to $3.3 billion, exceeding expectations. EPS of $0.52 was up 21% sequentially and 13% year over year. In display technologies, fourth-quarter sales were $841 million, up 2% sequentially and 6% year over year. In optical communications, fourth-quarter sales were $976 million, up 8% year over year and 7% sequentially. As we look ahead, we have strong momentum coming into 2021 and expect year-over-year growth to accelerate in the first quarter. Specifically, we expect core sales of $3.0 billion to $3.2 billion, compared to $2.5 billion in the first quarter last year, and earnings per share of $0.40 to $0.44, which is double last year's first-quarter earnings per share at the low end of the range.

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The team had a solid quarter, producing such stats as funds from operations came in above guidance, up 9% compared to second quarter last year. This marks 29 consecutive quarters of higher FFO per share as compared to the prior year quarter, truly a long-term trend. And for the year, FFO per share is up 9.5%. Our quarterly occupancy was high, averaging 96.6%, leaving us 97.5% leased and 97% occupied at quarter end, ahead of our projections. Our occupancy is benefiting from a healthy market with accelerating e-commerce and last-mile delivery trends, also benefiting our occupancy as a high year-to-date retention rate of 84%. Re-leasing spreads were strong for the quarter at 13.8% GAAP and 7.9% cash. Year-to-date leasing spreads are higher at 20.1% GAAP and 11.5% cash. Finally, same-store NOI was up 4.1% for the quarter and 3.9% year-to-date. I'm grateful we ended the quarter generally full at 97.5% leased, while Houston, our largest market at 13.8% of rents, is 97.9% leased, has roughly a 4% square footage roll through year-end and a five-month average collection rate on rents of over 99%. For July thus far, we've collected 95% of rents. Brent will speak to our budget assumptions, but I'm pleased that with our second quarter results and a realistic plan, we can reach $5.28 per share in FFO. We are only $0.02 shy of our original pre-pandemic expectations. In other words, we're not forecasting new spec developments at this time. FFO per share for the second quarter exceeded our guidance range at $1.33 per share and, compared to second quarter 2019 of $1.22, represented an increase of 9%. During the second quarter, we raised $30 million of equity at an average price of $123 per share. And earlier this month, we agreed to terms on two senior unsecured private placement notes totaling $175 million. The $100 million note has a 10-year term with a fixed interest rate of 2.61%. The second note is $75 million on a 12-year term with a fixed interest rate of 2.71%. Our debt-to-total market capitalization is 21%, debt-to-EBITDA ratio is 5.1 times, and our interest and fixed charge coverage ratios are over 7.2 times. We have collected 98.1% of our second quarter revenue and entered into deferral agreements for an additional 0.8%, bringing our total collected and deferred to 99% for the second quarter. As for July, we have collected 95.5% of rents thus far and have entered into deferral agreements on an additional 0.7%, bringing the total of collected and deferred for the month to 96.2%. Last April, we reported that 26% of our tenants have requested some form of rent deferment. In the three subsequent months, that has only risen to 29%. We have denied 79% of the request, are in various stages of consideration on 8% and have entered into some form of deferral agreement with 13% of the request. The rent deferred this far totals $1.5 million, which only represents approximately 0.4% of our estimated 2020 revenues. As a result, our actual performance and revised assumptions for the remainder of the year increased our FFO earnings guidance by 2.1% from a midpoint of $5.17 per share to $5.28 per share or a 6% increase over 2019. Among the changes were an increase in average occupancy from 95.2% to 96% and a decrease in reserves for uncollectible rent from $3.8 million to $3.6 million. Note that the reserve for potential bad debt for the third and fourth quarter of $2.4 million is not attributable to specific tenants. Other notable revisions include a lower average interest rate on new debt and the increase of equity issuances by $95 million.

In other words, we're not forecasting new spec developments at this time. FFO per share for the second quarter exceeded our guidance range at $1.33 per share and, compared to second quarter 2019 of $1.22, represented an increase of 9%.

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Q3 sales were $27.2 million, up from $25.3 million in Q3 last year. Our COVID-19 impact in the quarter was small compared to Q1, but we still lost approximately $900,000 of revenue due to employee absences related to COVID. Sales in the defense, the Navy market were $4.5 million in the quarter and now stand at $17.4 million year-to-date, approximately one quarter of our total sales through December. Q3 net income of $1.1 million or $0.11 per share, up from breakeven in Q3 last year. Cash is still strong at $69.3 million. Orders in Q3 were in excess of $61 million, our strongest order recorded ever, driven by $52 million in defense orders. Our backlog is now nearly $150 million, 70% of which is in the defense market. I'll discuss the sales detail in the last slide with the quarter at $27.2 million. The sales split in the quarter was 39% domestic and 61% international. Last year's third quarter was 53% domestic, 47% international. Gross profit increased to $6.2 million, up from $4 million last year primarily due to improved project mix as well as volume. Gross margin was 22.9%, up 6 -- up 160 -- I'm sorry, up from 16% last year, which was a particularly poor quarter last year. EBITDA margins were 6.7% up from 0.7% in last year's third quarter. And as I mentioned earlier, net income was $1.1 million up from breakeven last year. Looking at our year-to-date results, sales in the first nine months of fiscal 2021 was $71.8 million, up from $67.5 million last year. This is despite our challenging Q1 when the production was at 50% of capacity due to COVID impacts. Year-to-date sales are 52% domestic, 48% international compared with 65% and 35% respectively last year. Gross profit year-to-date is $15.5 million, up from 13.7% last year and gross margin is up 130 basis points to 21.6%. Year-to-date, EBITDA margins were 5.6% versus 3.1% in the first nine months of last year. Finally, net income was $2 million or $0.20 a share, up from $1.3 million or 13% -- I'm sorry, $0.13 a share last year. Cash is at $69.3 million, up $1.4 million from the end of Q2 but still down from $73 million at the end of fiscal 2020. Cash per share is $6.94. Our quarterly dividend remains firm at $0.11 a share and we have paid out $3.3 million year-to-date. Capital spending to-date is $1.5 million similar to last year and we expect this -- the total for the year to be between $2 million and $2.5 million in capital for the full year. Sales for the third quarter were $27.2 million. Sales for the refining industry were $16.5 million up from $12.2 million. $9.4 million of the revenue were from two projects for the Chinese refining market. Sales to the defense industry were $4.5 million and were up slightly year-on-year. Lastly, our annual guidance remains at $93 million to $97 million, which was communicated during our second quarter earnings call. At the peak of the second wave in early January, the production departments were operating at no less than 90% capacity. The orders for defense during the last two quarters were $65 million. It is important to point out the defense strategy where $100 million of new orders were secured in the last 12 quarters, representing 30% of total orders has been a terrific counter balance to headwinds within our more traditional markets. Across those same 12 quarters, $40 million in orders were won because of a different execution plan and different selling strategy. Stated differently, approximately 60% of orders in the past 12 quarters were from our traditional markets or customers and 40% from strategies to broaden revenue streams. There is not too much different from last quarter to report. Nonetheless, we expect to build backlog within this segment during the next year with a book-to-bill above 1. Backlog is $150 million with approximately $100 million for defense and $50 million for the company's more historic markets. 45% to 50% of our backlog is anticipated to convert during the next 12 months. We guide to revenue for the full year to be between $93 million and $97 million, implying fourth quarter revenue between $21 million and $25 million. Full year gross margin should fall between 21% to 22%. SG&A expense at $17.3 million to $17.8 million for the full year and our effective tax rate is planned to be between 22% and 24%. 15% of our total orders since late in fiscal 2019 have come from this strategy. We have 20 positions that we are hoping to fill over the next two years that would allow us to expand our backlog conversion and drive revenue growth.

Q3 net income of $1.1 million or $0.11 per share, up from breakeven in Q3 last year. Our quarterly dividend remains firm at $0.11 a share and we have paid out $3.3 million year-to-date. Lastly, our annual guidance remains at $93 million to $97 million, which was communicated during our second quarter earnings call. There is not too much different from last quarter to report. We guide to revenue for the full year to be between $93 million and $97 million, implying fourth quarter revenue between $21 million and $25 million.

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We have transformed the company's portfolio, delivered revenue and adjusted company FFO above consensus, produced strong underlying portfolio performance and increased the dividend by 11.6%. With 95% of our gross assets now industrial, we have substantially completed our portfolio transformation to a predominantly single-tenant industrial REIT. With 2.6 million square feet of space leased in the quarter, we raised our stabilized lease portfolio 110 basis points to 98.9% and increased base and cash base industrial rents on extensions and new leases 6.5% and 4.7%, respectively. Further, for the nine months ended September 30, we raised base and cash-based industrial rents on extensions and new leases 10.3% and 7%, respectively. Average rent per square foot in our warehouse distribution portfolio is $3.97, which we view as 6% to 8% below market, as market rents continue to grow considerably faster than the escalations built into our leases. And we note that rents in our target markets have grown on average approximately 8% over the last year. We secured a 5.5-year lease with a new tenant who will occupy the 195,000 square foot vacant property that we recently purchased in the Greenville-Spartanburg market as part of a four-property industrial portfolio acquisition. The lease term includes 2.75% annual rental escalations, and the lease produces an initial stabilized yield of 5.3% for the property. Additionally, we leased 68,000 square feet of available space to a new tenant at our Lakeland, Florida warehouse distribution facility for five years, increasing the building's occupancy from 53% to 84%. The starting rent is $5.70 per square foot with 3% annual escalations. Other significant leasing outcomes during the quarter that resulted in an increase to cash base rent over the prior lease term included a five-year lease with 3% annual escalations at our 640,000 square foot Statesville, North Carolina warehouse distribution facility and a three-year lease with 2.25% annual escalations at our 1.2 million square foot Olive Branch, Mississippi warehouse distribution facility. Subsequent to quarter end, we had a huge success at our 908,000 square foot spec development facility in Fairburn, Georgia, executing a seven-year lease with 3% annual escalations and bringing the stabilized yield to 7.2%, excluding our partner promote, which was well above our underwriting assumptions. We currently have four spec development projects in process, two of which we added during the third quarter, with an estimated total project cost of $358 million and $270 million left to fund. On the purchase front, we acquired $135 million of Class A warehouse distribution product during the quarter, with an additional $76 million purchased subsequently, and we currently have a sizable pipeline under review. Our sales volume as of September 30 totaled $219 million at average GAAP and cash cap rates of 7.6% and 7.9%, respectively. We sold an additional $25 million after quarter-end and have two other properties under contract to sell for $29 million. The new declared quarterly common share dividend, which will be paid in the first quarter of 2022, will be $0.12 per share, representing an 11.6% increase over the prior quarterly dividend. During the third quarter, we purchased five warehouse distribution assets spanning 1.3 million square feet for $135 million at average GAAP and cash stabilized cap rate of 4.9% and 4.6%, respectively. We also acquired a 293,000 square foot stabilized warehouse distribution facility in Columbus, Ohio, a primary distribution market in the central U.S. This facility is a recent build occupied by two tenants with a weighted average lease term of seven years and average annual rental escalations of 2.5%. Subsequent to quarter-close, we purchased a three-property, 878,000 square foot portfolio in the Whiteland submarket of Indianapolis. The three properties, all recently constructed, sit along I-65 in the Whiteland Exchange Business Park. Upon completion, which will be staggered in the first half of 2022, the three buildings will total roughly 1.9 million square feet. The estimated development cost of this project is approximately $133 million, with estimated stabilized cash yields projected to be in the low to mid-5% range. The Phoenix project is a 57-acre site in the Goodyear submarket along the Southwest Valley Loop 303 industrial hub. Upon completion, the project will consist of two Class A warehouse distribution facilities totaling 880,000 square feet. The site is in PV 303, the sub-market's premier master-planned business park that is highly desirable for corporate users. The estimated development cost is approximately $84 million, with estimated stabilized cash yield forecasted to be in the high 4% range. Currently, we have 2.4 million square feet of modern Class A industrial space in Phoenix; and, more specifically, two million square feet in Goodyear, and we'll further increase our footprint there with the completion of this development project. During the third quarter, we produced adjusted company FFO of roughly $54 million, or $0.19 per diluted common share. Today, we announced an increase to both the low and top end of our adjusted company FFO guidance range to a new range of $0.75 to $0.78 per diluted common share. Revenues for the quarter were approximately $83 million, with property operating expenses of just over $11 million, of which 84% was attributable to tenant reimbursement. G&A for the quarter was $8.4 million, and we expect 2021 G&A to be within a range of $33 million to $36 million. Our same-store portfolio was 98.7% leased at quarter end, with overall same-store NOI increasing 0.7%, which would have been approximately 1.9%, excluding single-tenant vacancy. Industrial same-store NOI increased 1.2% and would have been 2.5%, excluding single-tenant vacancy. At quarter-end, approximately 90% of our industrial portfolio leases had escalation, with an average rate of 2.6%. Our company's balance sheet remains solid, with net debt to adjusted EBITDA of 5.4 times at quarter-end and unencumbered NOI at 91.5%. During the quarter, we issued $400 million of senior notes due in 2031 with an attractive rate of 2.375%. The net proceeds and cash on hand were used to fully redeem our 4.25 senior notes due in 2023 and repay the outstanding balance under our revolving credit facility. Consolidated debt outstanding as of September 30 was approximately $1.5 billion with a weighted average interest rate of approximately 2.9% and a weighted average term of about eight years. Finally, during the quarter, we settled 3.9 million common shares previously sold on a forward basis, leaving $240 million, or 20.8 million common shares, of unsettled common share contracts available at quarter-end.

We have transformed the company's portfolio, delivered revenue and adjusted company FFO above consensus, produced strong underlying portfolio performance and increased the dividend by 11.6%. The new declared quarterly common share dividend, which will be paid in the first quarter of 2022, will be $0.12 per share, representing an 11.6% increase over the prior quarterly dividend. Today, we announced an increase to both the low and top end of our adjusted company FFO guidance range to a new range of $0.75 to $0.78 per diluted common share.

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These cost-out actions will reduce SG&A by $16 million in the fiscal year and just over $17 million on an annualized basis. In addition, we have cut capital budgets by over 50% to $4 million in fiscal year 2021. While the COVID-19 crisis has had an acute near-term impact to our business in late Q4 of 2020 and now in Q1 of fiscal year 2021, the supply demand imbalance in the old markets and reduced capital and operating budgets will have a lasting impact over the next 18 months to 24 months. Over the 65 plus years of our existence, we have built a global installed base and have long lasting relationships with loyal customers around the world. This business combined with low capital intensity is the key to the resilience of our business model that has enabled us to generate cash during prior downturns and will allow us to continue to generate positive cash flows over the next 12 months. Our current net debt to adjusted EBITDA ratio of 2.1 times means we are entering this difficult period from a position of strength. In FY 2020, we generated $61 million in free cash flow, paid down $38 million in debt and finished the year with $43 million in cash, with an additional $60 million in revolving credit. While we observed weaker discretionary spending beginning in our fiscal Q3, the unprecedented impact of COVID-19 on the global economy as well as the dislocation in oil and gas markets starting in March has combined to reduce our customers' capital and operating budgets for at least the next 12 months. Thermon's revenue of $88 million in fiscal Q4 was down 23% and at the lower end of our forecasted rage due to the impact of COVID-19 in the Western Hemisphere in Mach. While our gross margins were up 90 basis points year-over-year, they were negatively impacted by 390 basis points by one-time adjustment associated with operational execution in the quarter. Adjusted EBITDA of $9 million was down significantly due to lower volume and a cost base that does not yet reflect actions we have taken to address the lower volume environment we see moving forward. Europe's Q4 was largely responsible for the revenue decline, which was down 38% from prior year. Asia-Pacific was down 16% in our Q4 due to the early impact of the coronavirus in the region, but was able to show growth in fiscal 2020 despite the Q4 decline. We anticipate the recovery of demand for transportation fuels to be protracted and the oil supply overhang will take 18 months to 24 months to rebalance with many factors impacting the timing. We have repositioned the business such that upstream is a smaller percentage of the portfolio that during the last downturn, representing approximately 14% of fiscal 2020 revenues, with capital budgets being cut by 20% to 30% or more in certain markets or geographies, the bulk of those cuts by international oil companies have been focused on upstream capital budgets. While we continue to invest approximately 2.5% of our revenues in research and development and expect to release three to five new products in fiscal 2021. We believe the above actions will reduce expenses for fiscal 2021 by over $16 million and helped us right-size the business for the demand environment that we see over the next 18 months to 24 months. We have set goals for continuous improvement initiatives to deliver an annual incremental 100 basis point improvement in gross margins. Our primary customers in the broader oil and gas, chemical and power sectors have significantly reduced capital and operating budgets in the last 90 days, which in turn limits the demand for both our Greenfield and maintenance solutions. Orders in the first fiscal quarter to-date are down approximately 40% to 45% with our Greenfield business less impacted than our MRO/UE business. Our cash and investments balance at the end of March improved to $43.2 million and we generated $14.4 million in free cash flow in the quarter and we are able to pay down $5.6 million in debt. And year-to-date, we have generated $60.7 million in free cash flow and paid down $38 million in debt. And we have access to a $60 million revolver line of credit subject to a consolidated leverage ratio of 4.5 to 1, that steps down to 3.75 to 1 in December of this year. The debt pay down will reduce our interest expense next fiscal year by $0.04 a share, that's after tax and the reduction in amortization expense due to the previous private equity transaction, coupled with the interest expense savings will be accretive to our fiscal year '21 earnings per share by $0.23 a share and that's after tax with potential additional interest expense savings forthcoming. Our gross debt amount at 3/31 was $176 million and net debt of $133 million with a net debt to EBITDA ratio of 2.1 times. In addition, last month, we took actions to reduce our run-rate spending by $17 million by reducing personnel costs, discretionary spending and consultant and contractor costs. After accounting for the impact of the cost out actions that we have already executed, we believe our annualized breakeven revenue by which we mean the revenue levels where free cash flow is breakeven is between 35% and 40% lower than our fiscal year 2020 results. And again, we do not believe this to be representative how our results for the next 12 months and we will continue to stay close to our customers and monitor leading indicators for any changes to our plan. Turning to revenue and orders, our revenue this past quarter totaled $88.4 million and that's a decline of 22.6% against the prior year quarter. The legacy revenue mix between MRO/UE and Greenfield was 60% and 40% respectively versus a 50:50 mix in Q4 of fiscal year '19. And FX nominally decreased total revenue by $1.3 million and in constant currency, our revenue declined by 21%. Orders for the quarter totaled $90.5 million versus $105.7 million in the prior year quarter for a decline of 14%, again two factors previously mentioned. Our backlog of orders ended March at $105.7 million versus $120 million as of March of '19 and that's a decrease of 12%. And gross margins in our backlog improved to 33% versus 32% at the end of March '19. And our book-to-bill for the quarter was slightly positive at 1.02. Margins were 40.3% and that's a 90 basis point improvement versus the comp period and that was mainly driven by a favorable Greenfield MRO mix. And our gross profit declined by 9.4% due to the double-digit revenue decline or by 20.9% versus the record comp period and gross margins were impacted in the quarter by 390 basis points due to a one-time charge related to operational execution. Operating expenses for the quarter, that is SG&A and this excludes depreciation and amortization of intangibles totaled $26.4 million versus $24.3 million in the prior quarter, which includes $1 million of expenses relating to the restructuring in EMEA. Our opex as a percent of revenue was 29.9%, again excluding depreciation and amortization and that's an increase of 860 basis points from the prior year level of 21.3%. And we expect to take a one-time charge of approximately $2.8 million for cost reductions that occurred during May in our Q1 income statement. GAAP earnings per share for the quarter totaled a negative $0.09 compared to the prior year quarter of $0.20 and that's a decline of $0.29 per share. Adjusted earnings per share as defined by GAAP earnings per share less amortization expense and any-one time charges totaled $0.01 a share relative to $0.32 a share in the prior year quarter. Adjusted EBITDA declined by 57.6% versus the comparison quarter and adjusted EBITDA as a percent of revenue was 10.2% and that's a decline of 880 basis points versus the comp period and adjusted EBITDA totaled $9.2 million this past quarter. And our EBITDA conversion ratio and that's defined as EBITDA less capex divided by EBITDA for the last 12 months was 84.4%. Our capex spend for the fourth quarter totaled $3.9 million and that is inclusive of both growth and maintenance capital with fiscal year 2020 capex totaling $10 million. And we expect fiscal year '21 capex to be reduced by 60% to $4.0 million. Free cash flow per share for fiscal year '20 was $1.83 and that's a non-GAAP measure, but it reinforces our ability to generate cash. Taxes, the tax rate for the year was 30% and was impacted due to the non-deductibility of interest expense due to the GILTI tax provision. Revenue for the year totaled $383.5 million and that's a decline of 7.1% over the prior year driven mainly by our EMEA, where we have taken significant measures to adjust our cost structure and position the region for modest growth in fiscal year '21. Gross profit for the year was $161.6 million, a decline of 81% over the prior year. Gross margins were 42.1% and that's a 50 basis point decline over the prior year. And SG&A was $100.8 million and that's a 3.4% increase over the prior year and that excludes the cost of our cost-out actions throughout this year. Adjusted EBITDA for the year was $64.3 million and that's a decline of 22.9% over the prior year and 16.8% as a percent of sales. GAAP earnings per share for the year was $0.36 and that's a decline of $0.33 and adjusted earnings per share was $0.75 or a decline of $0.44.

Turning to revenue and orders, our revenue this past quarter totaled $88.4 million and that's a decline of 22.6% against the prior year quarter. Orders for the quarter totaled $90.5 million versus $105.7 million in the prior year quarter for a decline of 14%, again two factors previously mentioned. Our backlog of orders ended March at $105.7 million versus $120 million as of March of '19 and that's a decrease of 12%. GAAP earnings per share for the quarter totaled a negative $0.09 compared to the prior year quarter of $0.20 and that's a decline of $0.29 per share. Adjusted earnings per share as defined by GAAP earnings per share less amortization expense and any-one time charges totaled $0.01 a share relative to $0.32 a share in the prior year quarter.

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In the quarter, we delivered comparable store sales growth of 5.8% and adjusted operating income margin of 11.4%, an increase of 11 basis points versus 2020. On a two-year stack, our comp sales improved 13.3% and margins expanded 227 basis points compared to Q2 2019. Adjusted diluted earnings per share of $3.40 increased 15.3% compared to Q2 2020 and 56.7% compared to 2019. Year-to-date, free cash flow more than doubled, which led to a higher than anticipated return of cash to shareholders in the first half of the year, returning $661.4 [Phonetic] million through a combination of share repurchases and quarterly cash dividends. Finally, we're pleased that through the first half of the year, we added 28 net new independent Carquest stores. We also announced the planned conversion of an additional 29 locations in the West as Baxter Auto Parts joins the Carquest family. In Q2, our VIP membership grew by 8% and our Elite members representing the highest tier of customer spend, increased 21%. Shifting to operating income, we expanded margin in the quarter on top of significant margin expansion in Q2 2020. In Q2, we converted nearly 150 additional stores and remain on track with the completion of the originally planned stores by the end of Q3 2021. Our team delivered sales per store improvement and we remain on track to reach our goal of $1.8 million average sales per store within our timeline. In the first half of the year, we opened six Worldpac branches, 12 Advance and Carquest stores and added 28 net new Carquest independents, as discussed earlier. We also announced the planned conversion of 109 Pep Boys locations in California. Our total recordable injury rate decreased 19% compared to Q2 2020 and 36% compared to Q2 2019. In Q2, our net sales increased 5.9% to $2.6 billion. Adjusted gross profit margin expanded 239 basis points to 46.4%, primarily as a result of the ongoing execution of our category management initiatives, including strategic sourcing, strategic pricing and own brand expansion. In the quarter, same SKU inflation was approximately 2% and we expect this will increase through the balance of the year. Year-to-date, gross margin improved 156 basis points compared to the first half of 2020. As anticipated, Q2 adjusted SG&A expenses increased year-over-year and were up $109 million versus 2020. This deleveraged 228 basis points and was a result of three primary factors. These increases in Q2 were partially offset by a decrease in COVID-19 related expenses to approximately $4 million compared to $15 million in the prior year. As a result of these factors, our SG&A expenses increased 13.3% to $926.4 million. As a percent of net sales, our SG&A was 35% compared to 32.7% in the prior year quarter. Year-to-date, SG&A as a percent of net sales improved 88 basis points compared to the first half of 2020. Our adjusted operating income increased to $302 million compared to $282 million one year ago. On a rate basis, our adjusted OI margin expanded by 11 basis points to 11.4%. Finally, our adjusted diluted earnings per share increased 15.3% to $3.40 compared to $2.95 in Q2 of 2020. Our free cash flow for the first half of the year was $646.6 million, an increase of $338.4 million compared to last year. Our capital spending was $58.7 million for the quarter and $129.6 million year to-date. And in line with our guidance, we estimate we will spend between $300 million and $350 million in 2021. Due to favorable market conditions along with our improved free cash flow in Q2, we returned nearly $458 million to our shareholders through the repurchase of 2 million shares at an average price of $197.52 and our recently increased quarterly cash dividend of $1 per share. Based on all these factors, we are increasing our full year 2021 guidance ranges, including net sales in the range of $10.6 billion to $10.8 billion, comparable store sales of 6% to 8% and adjusted operating income margin of 9.2% to 9.4%. As a result, we're lowering our guidance range and now expect to open 80 to 120 new stores this year. Additionally, given the improvement of our free cash flow and our accelerated share repurchases in the first half of the year, we are also increasing our guidance for free cash flow to a minimum of $700 million and an expected range for share repurchases of $700 million to $900 million.

In the quarter, we delivered comparable store sales growth of 5.8% and adjusted operating income margin of 11.4%, an increase of 11 basis points versus 2020. Adjusted diluted earnings per share of $3.40 increased 15.3% compared to Q2 2020 and 56.7% compared to 2019. Shifting to operating income, we expanded margin in the quarter on top of significant margin expansion in Q2 2020. In Q2, our net sales increased 5.9% to $2.6 billion. Finally, our adjusted diluted earnings per share increased 15.3% to $3.40 compared to $2.95 in Q2 of 2020.

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Our operating income increased 154% in the first quarter of 2021 versus the first quarter of 2020, which was before the impact of the pandemic. The 30% year-over-year increase in U.S. housing permits and associated housing starts shows the strength in residential construction activity that benefited our downstream building products business. For the first quarter of 2021, we reported net income of $242 million or $1.87 per share compared to net income of $145 million for the first quarter 2020, which included a $62 million tax benefit from the CARES Act. These results are inclusive of the previously mentioned severe winter storm impact of approximately $100 million or $0.61 per share in the first quarter. The $97 million first quarter year-over-year increased net income is a result of higher sales prices and integrated margins for polyethylene and PVC and higher earnings resulting from the strong demand in our downstream building products business. While we work quickly to get our facilities back online, our estimates for a loss margin from sales and repair expense are approximately $120 million. We incurred approximately $100 million in the first quarter of 2021 results or approximately $0.61 per share, with the remaining $20 million falling into the second quarter. Of this estimated first quarter impact of $100 million, approximately 75% was related to our Vinyls segment, with the balance affecting our Olefins segment. First quarter 2021 net income increased by $129 million from fourth quarter 2020 net income of $113 million. Our utilization of the FIFO method of accounting resulted in a favorable pre-tax impact of approximately $55 million or $0.33 per share compared to what earnings would have been reported under the LIFO method. For the first quarter of 2021, Vinyls operating income of $200 million increased $127 million from the prior year period, primarily as a result of higher sales prices and margins for PVC resin and higher sales prices and margins in our downstream building products business. For the first quarter of 2021, Vinyls operating income increased $34 million from fourth quarter of 2020, primarily the result of higher sales for PVC resin and higher volumes in our downstream building products business. Our first quarter 2021 operating income of $180 million increased $118 million from the first quarter 2020, driven by strong pricing and improved demand, offset by lower sales volumes resulting from the severe winter storm. For the first quarter 2021, Olefins operating income increased $158 million from fourth quarter of 2020, primarily due to higher sales prices and margins as well as increased sales volumes, partially offset by higher feedstock and fuel cost. We generated $265 million in cash flows from operations in the first quarter 2021, resulting in total cash and cash equivalents of $1.4 billion. First quarter 2021 capital expenditures were $141 million. We maintain a long-dated debt maturity profile with a weighted average debt maturity of 14 years, anchoring our investment-grade balance sheet. We expect our effective tax rate for the full year of 2021 to be approximately 23% and a cash tax rate of approximately 19%. As we stated in our last call, we forecast our capital expenditures for the year to be between $700 million and $800 million. This turnaround and associated outage is expected to last approximately 60 days. This product is available under the brand name GreenVin, which has a reduced CO2 impact of more than 30% compared to conventional caustic soda.

For the first quarter of 2021, we reported net income of $242 million or $1.87 per share compared to net income of $145 million for the first quarter 2020, which included a $62 million tax benefit from the CARES Act.

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In Q1, we saw continued improvement in both the breadth and pace of the recovery, with six of our seven segments delivering strong growth in the quarter, with revenue increases at the segment level ranging from 6% to 13%, and that's with one less shipping day in Q1 of this year versus last year. At the enterprise level, organic growth was plus 6% in Q1 or plus 8% on an equal days basis, and that was despite the fact that our Food Equipment segment was still down 10% in the quarter. The fundamental strength of our 80/20 front-to-back business system and the skill and dedication of our people around the world, combined with the Win the Recovery actions that we initiated over the course of the past year allowed us to meet our customers' increasing needs while at the same time delivering strong profitability leverage, as evidenced by our 19% earnings growth, 45% incremental margins, and 120 basis points of margin benefits from our enterprise initiatives in the quarter. Despite rising raw material costs and a tight supply chain environment, we maintained our world-class service levels to our customers while also establishing several all-time Q1 performance records for the company, including earnings per share of $2.11, operating income of $905 million, and an operating margin of 25.5%. For the full year, we now expect organic growth of 10% to 12%, operating margin in the range of 25% to 26%, and earnings per share of $8.20 to $8.60 per share, which at the $8.40 midpoint represents 27% earnings growth versus last year. At the midpoint of our revised guidance, 2021 full year revenues would be up 1% versus 2019 and earnings per share would be up 9%. Our operating teams around the world responded to our customers' increasing needs, as they always do, and delivered revenue growth of 10%. Organic growth of 6% was the highest organic growth rate for ITW in almost 10 years. And on an equal days basis, organic revenue grew 8%. Organic growth was positive across all major geographies, with China leading the way with 62%, North America was up 4% and Europe grew 1%. Relative to Q4, a new trend that emerged in Q1 was a meaningful pickup in demand in our capex-driven equipment businesses, Test & Measurement and Electronics which grew 11%; and Welding, which grew 6%. GAAP earnings per share of $2.11 was up 19% and an all-time earnings per share record for continuing operations. Operating leverage was a real highlight this quarter with incremental margins of 45% as operating income grew 19% year-over-year. Operating margins improved to 25.5% in the quarter, an increase of almost 200 basis points as a result of volume leverage and a continued strong contribution of 120 basis points from our enterprise initiatives, partially offset by the margin impact of price cost. Excluding the third quarter of 2017, which had the benefit of a one-time legal settlement, operating margin of 25.5% was our highest quarterly margin performance ever. By leveraging our produce where we sell supply chain strategy, our proprietary 80/20 front-to-back business system and supported by the fact that we were fully staffed for this uptick in demand due to our Win the Recovery initiative, we were able to maintain our normal service levels to our customers. In Q1, for example, our operating margin was impacted 60 basis points due to price costs. And our incremental margin would actually have been 52%, not 45% if it wasn't for this impact from price costs. At this early stage in the recovery, our 25.5% operating margins are already exceeding our pre-COVID operating margins. Four of the seven segments delivered operating margin of around 28% or better in Q1, with one segment, Welding, above 30% in a quarter for the first time ever. I think it says a lot of our operating teams, that when faced with the challenges of the global pandemic, they stayed focused on our long-term enterprise strategy and continue to make progress toward our long-term margin performance goal of 28% plus. After-tax return on capital was a record 32.1%, and free cash flow was solid at $541 million with a conversion of 81% of net income, in line with typical seasonality for Q1. We continue to expect a 100% plus conversion for the full year. As planned, we repurchased 250 million of our shares this quarter, and the effective tax rate was 22.4%, slightly below prior year. So in summary, the first quarter was solid for ITW with broad-based organic growth of 6%, strong profitability leverage, 19% earnings growth, 45% incremental profitability and record operating margin and earnings per share performance. With the exception of Automotive OEM, every segment had a higher organic growth rate in Q1 than they did in Q4, and six of our seven segments delivered strong organic growth in the quarter, with double-digit growth in Construction Products, and Test & Measurement and Electronics, which were also the most improved segments in this sequential view, going down -- going from down 3% in Q4 to up 11% in Q1. Welding improved eight percentage points, growing 6% in Q1, providing further evidence that the industrial capex recovery is beginning to take hold as visibility and confidence is coming back. At the enterprise level, ITW's organic growth rate went from down 1% in Q4 to up 6%. And I would just highlight that this is 6% organic growth with one of our segments, Food Equipment, while on its way to recovery is still down 10% year-over-year. And the demand recovery in the fourth quarter continued this quarter with organic growth of 8% and total revenue growth of 13%. North America revenue was down 2% as customers continue to adjust their production schedules in response to the well-publicized shortage of certain components, including semiconductor chips. We estimate this impacted our Q1 sales by about $25 million, and it is likely to continue to impact our revenues to the tune of about $50 million in Q2 and another $50 million in the second half of the year. By region, North America being down in Q1 was more than offset by Europe, which was up 4%, and China up 58%. And finally, the team delivered solid operating margin performance of 24.1%, an improvement of 320 basis points. So, revenue was down 7%, with organic revenue down 10%, but like I said, much improved versus Q4. Overall, North America was down 6%, with equipment down only 1% as compared to a 22% decline in Q4. Institutional, which represents about 35% of our North American equipment business was down 7%, with healthcare about flat and education still down about 10%. Restaurants, which represents 25% of our equipment business was down in the mid-teens, with full-service restaurants down about 30%, but fast casual up low single-digits. Retail, which is now 25% of the business, was up more than 20% as a result of strong demand and new product rollouts. International was down 15% and is really a tale of two regions. As you would expect, Europe was down 22% due to COVID-19-related lockdowns. And on the other hand, Asia-Pacific was up 44%, with China up 99%. Overall, equipment sales were down 4% and service down 19%. Test & Measurement and Electronics delivered revenue growth of 14% with 11% organic growth. Test & Measurement was up 7% with continued strength in semiconductors and healthcare end markets now supplemented by strengthening demand in the capital equipment businesses as evidenced by the Instron business growing 12%. The Electronics business grew 16%, with strong demand for clean room technology products, automotive applications, and consumer electronics. Operating margin of 28.4% was up 330 basis points. Moving to slide 6, as I mentioned earlier, we saw a strong sequential improvement in Welding as the segment delivered organic growth of 6%, the highest growth rate in almost three years. The commercial business, which serves smaller businesses and individual users, usually leads the way in a recovery, and Q1 was their third quarter in a row with double-digit growth, up 17% this quarter. The industrial business continued its sequential improvement trend and was down only 1% with customer capex spend picking up and backlogs building. Overall, equipment sales were up 10% and consumables were flat versus prior year. North America was up 7% and international growth of 4% was primarily driven by recovery in China and some early signs of demand picking up in oil and gas. Solid volume leverage and enterprise initiatives contributed to a record margin performance of 30.3%, which, as I said, marked the first time an ITW segment delivered operating margins above 30%. Polymers & Fluids delivered organic growth of 9%, with Polymers up 16%, driven by strength in MRO applications, particularly for heavy industries. The automotive aftermarket business continued to benefit from strong retail sales with organic growth of 9%, while fluids, which has a larger presence in Europe was down 1%. Operating margin benefited from solid volume leverage and enterprise initiatives to deliver margins of 25.7%. Moving to slide 7, construction was the fastest-growing segment this quarter with organic growth of 13%. North America was up 12%, with continued strong demand in residential renovation and in the home center channel. Commercial construction, which is only about 15% of our U.S. sales was up 3%. European sales grew 19% with double-digit growth in the UK and Continental Europe. Australia and New Zealand grew 7% with strength in both residential and commercial markets. Operating margin of 27.6% was an improvement of 420 basis points. Specialty revenues were up 10%, with organic revenue of 7% and positive growth in all regions. North America was up 6%; Europe, up 5%; and Asia Pacific was up 24%. Demand for consumer packaging remained solid at 6%. The outcome of that exercise is an organic growth forecast of 10% to 12% at the enterprise level. This compares to a prior organic growth guidance of 7% to 10%. Foreign currency at today's exchange rates adds 2 percentage points to revenue for total revenue growth forecast of 12% to 14%. As you saw, we're off to a strong start on operating leverage and enterprise initiatives, and we are raising our operating margin guidance by 100 basis points to a new range of 25% to 26%, which incorporates all known raw material cost increases and the corresponding pricing actions. Relative to 2020, our 2021 operating margins of 25% to 26% are 250 basis points higher at the midpoint and they are almost 150 basis points higher than our pre-COVID 2019 operating margins of 24.1%. As we continue to make progress toward our long-term performance goal of 28% plus, as I mentioned earlier. Our incremental margins for the full year are expected to be above our typical 35% to 40% range. Finally, we are raising our GAAP earnings per share guidance by $0.60 and or 8% to a new range of $8.20 to $8.60. The new midpoint of $8.40 represents an earnings growth rate of 27% versus prior year and a 9% increase relative to pre-COVID 2019 earnings per share of $7.74. A few final housekeeping items to wrap it up, with no changes to: one, the forecast for free cash flow; two, our plan to repurchase approximately $1 billion of our own shares; and three, our expected tax rate of 23% to 24%.

Despite rising raw material costs and a tight supply chain environment, we maintained our world-class service levels to our customers while also establishing several all-time Q1 performance records for the company, including earnings per share of $2.11, operating income of $905 million, and an operating margin of 25.5%. For the full year, we now expect organic growth of 10% to 12%, operating margin in the range of 25% to 26%, and earnings per share of $8.20 to $8.60 per share, which at the $8.40 midpoint represents 27% earnings growth versus last year. GAAP earnings per share of $2.11 was up 19% and an all-time earnings per share record for continuing operations. Finally, we are raising our GAAP earnings per share guidance by $0.60 and or 8% to a new range of $8.20 to $8.60. A few final housekeeping items to wrap it up, with no changes to: one, the forecast for free cash flow; two, our plan to repurchase approximately $1 billion of our own shares; and three, our expected tax rate of 23% to 24%.

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Steve has been with AES for 14 years and has served in a variety of roles, including as Chief Executive Officer of Fluence and most recently as Head of both Strategy and Financial Planning. I am happy to report that we are making excellent progress on our strategic and financial goals, and remain on track to deliver on our 7% to 9% annualized growth in adjusted earnings per share and parent free cash flow through 2025. We had a strong third quarter with adjusted earnings per share of $0.50, a 19% increase versus the same quarter last year. We expect to deliver on our full year guidance, even with a $0.07 noncash impact from an updated accounting interpretation related to the equity units of a convert we issued earlier this year. Since our last call in August, we have signed an additional 1.1 gigawatts of renewable PPAs, bringing our year-to-date total to four gigawatts. Additionally, we are in very advanced discussions for another 850 megawatts of wind, solar and energy storage. This represents the largest addition in our history and 66% more than in 2020. With our pipeline of 38 gigawatts of potential projects, including 10 gigawatts that are ready to bid in the U.S., we are well positioned to capitalize on this substantial opportunity. As such, almost 90% of our new business has been from bilateral negotiated contracts with corporate customers. For example, in Brazil, we see demand for more than 25 gigawatts of renewables, providing a significant opportunity to earn mid- to high-teen returns in U.S. dollars, while at the same time, diversifying our Brazilian portfolio of mostly hydro generation. To that end, for the first time ever in Brazil, we are in very advanced negotiations to design a 300-megawatt U.S. dollar-denominated contract with a large multinational corporation for 15 years. Our backlog of 9.2 gigawatts is the largest ever with 60% in the U.S. These projects represent one of the main drivers for our growth through 2025 and beyond. Furthermore, more than 80% of our adjusted pre-tax contribution is in U.S. dollars, insulating us from fluctuations in foreign currencies. AES Next operates as a separate unit within AES where we develop and incubate new businesses, including a combination of strategic investments and internally developed businesses, representing approximately $50 million of gross capital annually. Another example is 5B, a prefabricated solar solution company that has patented technology, allowing projects to be built in 1/3 of the time and on half as much land while being resistant to hurricane force winds. In 2021, this drag on earnings is expected to be approximately $0.06 per share. We assume these losses from AES Next in our 2021 guidance and our 7% to 9% annualized growth rate through 2025. As you know, last week, Fluence, our energy storage joint venture with Siemens, which began as a small business within AES, became a publicly listed company with a current valuation of around $6 billion. Similarly, early this year, another AES Next business, Uplight, received evaluation in a private transaction of $1.5 billion. The value of our interest in these two businesses is now at least $2.5 billion or $3 per share compared to the book value of our investments of approximately $150 million. I have been at AES for 14 years and feel very fortunate to work at a company that is transforming the electric sector so profoundly along so many talented people in finance and throughout the company. In my previous role, I led corporate strategy and financial planning where we developed our plan to get to greater than 50% renewables at least 50% of our business in the U.S. and to reduce our coal share to less than 10% by 2025, all while growing the company 7% to 9%. Before I dive into our financial performance, I want to discuss the adjustment to our accounting that we made this quarter relating to the treatment of the $1 billion in equity units we issued in the first quarter this year. This adjustment results in an annual impact of roughly $0.07 this year and $0.09 in 2022 and 2023 using a full year of an additional 40 million shares. Adjusted earnings per share was $0.50 for the quarter versus $0.42 for the comparable quarter last year. This 19% increase was primarily driven by improvements in our operating businesses, new renewables and parent interest savings. Third quarter results also reflect an approximate $0.03 quarter-to-date impact from the higher share count due to the inclusion of 40 million additional weighted average shares relating to the equity units that I just mentioned. Adjusted pre-tax contribution, or PTC, was $428 million for the quarter, an increase of $97 million versus third quarter of 2020. In the US and Utilities SBU, PTC increased $69 million as a result of our continued progress in growing our U.S. footprint. In California, our 2.3 gigawatt Southland legacy portfolio demonstrated its critical importance by continuing to meet the state's pressing energy needs and its transition to a more sustainable carbon-free future. To summarize our performance in the first three quarters of the year, we earned adjusted earnings per share of $1.07 versus $0.96 last year. As I mentioned earlier, in terms of our full year guidance, we are incorporating the $0.07 per share noncash impact from the adjustment for the equity units issued earlier this year. Prior to this adjustment, we had expected to be in the upper half of our 2021 adjusted earnings per share guidance range, but we now expect to come in at the lower end of the range of $1.50 to $1.58. Beginning on the left hand of the slide and consistent with our prior disclosure, we expect approximately $2 billion of discretionary cash this year. We remain confident in our parent free cash flow target midpoint of $800 million and the $100 million from the sale of Itabo, and we received the $1 billion of proceeds from the equity units issued in March. The uses are largely unchanged from the last quarter with $450 million in returns to our shareholders this year, consisting of our common share dividend and the coupon on the equity units. We also continue to expect almost $1.5 billion of investment in our subsidiaries, with about 60% going toward renewables globally. Our investment program continues to be heavily weighted to the U.S. with approximately 70% targeted for our U.S. businesses. We are increasing our target for science renewable PPAs from four gigawatts to five gigawatts and Fluence successfully completed its $6 billion IPO. We remain committed to delivering on our strategic and financial goals, including our 7% to 9% annualized growth rate in earnings and cash flow, and will continue to create greater shareholder value by being the leading integrator of new technologies.

We had a strong third quarter with adjusted earnings per share of $0.50, a 19% increase versus the same quarter last year. We assume these losses from AES Next in our 2021 guidance and our 7% to 9% annualized growth rate through 2025. Adjusted earnings per share was $0.50 for the quarter versus $0.42 for the comparable quarter last year. Prior to this adjustment, we had expected to be in the upper half of our 2021 adjusted earnings per share guidance range, but we now expect to come in at the lower end of the range of $1.50 to $1.58.

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Earnings per share grew 93% to a record $1.39 per share. For HVAC equipment, residential sales increased 18%, and commercial equipment sales stabilize and are now trending more positively. Over the last 12 months, residential equipment sales in our U.S. markets have increased 15%, and we believe meaningful market share gains have been achieved. TEC adds 32 locations and approximately $300 million in revenue and establishes Watsco's first major presence in the Midwest United States. Lastly, a reminder that we raised our dividends by 10% in April 2021 to $7.80, a follow-up to the record cash flow achieved in 2020. 2021 marks our 47th consecutive year of paying dividends, and yet, we have increased our dividends 19 over the last 20 years, from $0.10 per share in '20 -- in the year 2000 -- let me say that again. From $0.10 per share in '20 -- in the year 2000 to today's annual rate of $7.80.

Earnings per share grew 93% to a record $1.39 per share.

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While weather was $0.03 below normal for the quarter, we remain within our previously reported guidance range. As we move ahead, I'm pleased to note that in June, OGE received its 19th EEI Emergency Response awards since 1999 for our power restoration efforts during the 2020 New Year's Eve snowstorm. We've been recognized with this highest national distinction for emergency recovery 11 times for major storms affecting our system and eight times for assisting others. Systemwide, growth in customer load is driving $75 million of increased capital investments. Investments include substation enhancements, projects at Tinker Air Force Base and upgrades of our 69 kV line to support the load of larger and growing customers. As you can see on slide five, our resource needs are driven by expected load growth as well as the retirement of aging, less efficient, less reliable gas plants that were built more than 50 years ago. We expect to retire approximately 850 megawatts over the next five to six years. We plan to execute this in 100 to 150-megawatt annual increments, beginning with solar over the next five to six years to really smooth out the customer impacts. When complete, our overall carbon intensity will drop by more than 6% and the overall fleet efficiency will improve even more. Our securitization filing in Oklahoma is on track for recovery approximately 85% of the total cost associated with February's winter storm year. We expect to achieve savings of more than 100 megawatts in demand, nearly 500,000 megawatt hours of energy saved, helping us to efficiently operate our generation fleet as we grow our customer base and maintain affordability. With the first half of the year now behind us, we expect 2021 weather normalized load to be more than 2% above 2020 levels. In addition, our strong customer growth of 1.3% reflects the combination of highly affordable rates and our ability to service commercial expansion in our markets, which leads me to our business and economic development activities. Last quarter, we discussed the additional 50 megawatts of load we will add by the end of the year due to our slate of business and economic development activities at that time. I'm pleased to say that the pace of these activities has ramped up even further, enabling us to increase that estimate up to 75 megawatts, of which 36 megawatts is already connected, and we're far from done. Through the first half of 2021, the new projects secured by our teams have helped to add more than 4,100 new jobs, all across our service territory. One such project, Pierre Foods, is completing a 200,000 square foot regional fulfillment center in Oklahoma City, adding 10 megawatts of load and 550 jobs. And affordability remains a key competitive advantage, that is evident in our business and economic development activity as well as customer growth, which combined have us on track for sustained load growth of approximately 1% going forward with still many opportunities ahead. Oklahoma's unemployment rate in June was 3.7% compared to the national average of 5.9%. In Oklahoma City, the largest metro area in our service territory, had a rate of just 3.7% in June, the third lowest from a large metropolitan series. Similarly, Fort Smith, Arkansas, had a rate of 4.4% in June. For the second quarter of 2021, we achieved net income of $113 million or $0.56 per share as compared to $86 million or $0.43 per share in 2020. At the utility, OGE's second quarter results were $0.03 higher than 2020 despite mild weather, primarily driven by higher revenues from the recovery of our capital investments and improved load from customer growth, partially offset by higher depreciation on a growing asset base. Our natural gas midstream operation results were $0.16 per share in the second quarter compared to $0.10 in 2020. Once again, we are also pleased to see customer growth coming in strong at 1.3% year-over-year. Furthermore, our commercial and industrial customer classes are showing real momentum with year-over-year load growth of approximately 12% and 9% in the second quarter more than compensating for the lower residential volumes we are experiencing as employees begin to return to the workplace. Overall, we saw a 5.7% total load increase during the quarter, generally in line with our expectations. For the full year, we still expect total weather normal load results to be more than 2% above 2020 levels. As discussed during our Q1 call, we began the year with a midpoint earnings per share target of $1.81 per share, but immediately faced a net headwind from the February weather event of $0.07 per share. As I'll speak to in a moment, in June, we were a net receiver of cash from the second round of SPP settlements, reducing the earnings per share impact of the Guaranteed Flat Bill program by $0.01 per share. Thus, as of June 30, the net impact to earnings from the February weather event is $0.06 per share. When you exclude the weather impact associated with the winter storm, unfavorable weather has been approximately a $0.05 loss year-to-date. To date, we have identified and activated $0.07 to $0.09 of mitigation initiatives, including continued O&M agility. Based on our progress to date, we remain within our earnings per share guidance range of $1.76 to $1.86 per share for full year 2021. Our business fundamentals are strong, and we continue to have great confidence in our ability to grow OGE at a 5% long-term earnings per share growth rate through 2025. Following the additional SPP resettlement that took place in June, the overall impact of fuel and purchase power costs incurred have been reduced by approximately $100 million. As of June 30, fuel and purchase power costs of approximately $850 million were recorded on the balance sheet. In Oklahoma, $755 million has now been deferred to a regulatory asset with the initial carrying cost based on the effective cost of debt financing. In Arkansas, the updated fuel and purchase power costs deferred are approximately $92 million. As we noted previously, we initially secured a $1 billion credit commitment agreement that provided short-term funding for our incurred fuel and purchase power costs. In May, the term loan was refinanced by issuing $1 billion of senior notes to serve as a bridge until securitization takes place. These two year notes carry an average rate of 63 basis points and are callable at par after six months, providing flexibility for early repayment depending on the timing of the securitization transactions. We believe our metrics will return to our targeted 18% to 20% level once securitization is complete. Finally, we remain confident in our ability to drive long-term OGE earnings per share growth of 5% based off the midpoint of 2021 guidance of $1.81 per share, which, when coupled with a stable and growing dividend, offers investors an attractive total return proposition.

Systemwide, growth in customer load is driving $75 million of increased capital investments. I'm pleased to say that the pace of these activities has ramped up even further, enabling us to increase that estimate up to 75 megawatts, of which 36 megawatts is already connected, and we're far from done. For the second quarter of 2021, we achieved net income of $113 million or $0.56 per share as compared to $86 million or $0.43 per share in 2020. Based on our progress to date, we remain within our earnings per share guidance range of $1.76 to $1.86 per share for full year 2021.

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With me on the call today are Seamus Grady, chief executive officer; TS Ng, chief financial officer; and Csaba Sverha, vice president of operations, finance, and CFO designate. Revenue in the second quarter was 426 million, up 7% from the first quarter and 6% from a year ago. Revenue upside largely fell to the bottom line with non-GAAP net income of $1 per share, which was also above the top end of our guidance range. Gross margin was 11.9%, and we continue to anticipate non-GAAP gross margins to be within our target range of 12 to 12 and a half percent for the full year. Optical communications revenue was 322 million, up 6% from the first quarter. This represented 76% of total revenue, consistent with the first quarter. Within optical communications, telecom revenue was 248 million, up 8% from the first quarter and 20% from a year ago, and represented 77% of optical revenue. Datacom revenue in the second quarter was 74 million, a slight increase from Q1, which was better than we had anticipated as demand trends for these products continue to stabilize. Datacom represented 23% of optical communications revenue. By technology, silicon photonics-based optical communications revenue increased by 7% from the first quarter to 82 million, and represented 26% of optical communications revenue. Revenue from QSFP28 and QSFP56 transceivers was 48 million, up 3 million from the first quarter. By data rate, 100-gig programs represented 49% of optical communications revenue at 159 million, and products rated at speeds of 400 gig and above continued to see rapid growth, up 31% from the first quarter to 49 million. Looking at our non-optical communications business, revenue of 104 million was up from 97 million in the first quarter, which was also better than expected. We were pleased to see the demand for industrial lasers improve, and as a result, revenue for these products was also better than expected at 46 million, compared to 41 million in the first quarter. Automotive revenue moderated to 21 million, reflecting normal quarter-to-quarter variability from next generation automotive programs and which we expect to return to growth in the third quarter. Sensor revenue increased slightly to 3.9 million from 3.5 million. Finally, revenue generated from other non-optical applications grew 20% sequentially to 33 million, mainly from Fabrinet West. While it is still early days, we believe that if this program ramps as anticipated, that Cisco could represent 10% of revenue or more for Fabrinet in fiscal 2021. Total revenue in the second quarter of fiscal year 2020 was 426.2 million, above the upper end of our guidance range, and a quarterly record. Non-GAAP net income was $1 per share, and was also above our guidance range, even after a foreign exchange headwind of 1 million, or approximately $0.03 per share. Non-GAAP gross margin in the second quarter was 11.9%. Non-GAAP operating expense was 12.3 million in the second quarter. As a result, non-GAAP operating income was 38.5 million, and non-GAAP operating margin was 9%. Taxes in the quarter was 2 million, and our normalized effective tax rate was less than 5%. We continue to expect our effective tax rate to be 5 to 6% for the full year. Non-GAAP net income was above our guidance range at 37.7 million in the second quarter or $1 per diluted share, as I indicated earlier, on a GAAP basis, which includes share base compensation expenses and amortizations of debt issuing costs, net income for the second quarter was 31.2 million or $0.83 per diluted share, also above the high-end of our guidance. At the end of second quarter, cash, restricted cash, and investments was 450.5 million compared to 436.4 million at the end of the first quarter. Operating cash flow in the quarter was 50 million, and with capex of 9.1 million, free cash flow was 40.9 million in the second quarter. 62.2 million remain in our share repurchase program. For the third quarter, we anticipate revenue to be between 410 and 418 million. From an earnings per share perspective, we anticipate non-GAAP net income per share in the third quarter to be in the range of $0.92 to $0.95, and GAAP net income per share of $0.75 to $0.78, based on approximately 37.9 million fully diluted shares outstanding.

With me on the call today are Seamus Grady, chief executive officer; TS Ng, chief financial officer; and Csaba Sverha, vice president of operations, finance, and CFO designate. Total revenue in the second quarter of fiscal year 2020 was 426.2 million, above the upper end of our guidance range, and a quarterly record. Non-GAAP net income was above our guidance range at 37.7 million in the second quarter or $1 per diluted share, as I indicated earlier, on a GAAP basis, which includes share base compensation expenses and amortizations of debt issuing costs, net income for the second quarter was 31.2 million or $0.83 per diluted share, also above the high-end of our guidance. For the third quarter, we anticipate revenue to be between 410 and 418 million. From an earnings per share perspective, we anticipate non-GAAP net income per share in the third quarter to be in the range of $0.92 to $0.95, and GAAP net income per share of $0.75 to $0.78, based on approximately 37.9 million fully diluted shares outstanding.

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Revenue of $6.7 billion was up 9% year over year, with better-than-normal sequential seasonality. I'm particularly pleased with the double-digit revenue growth in both our HPC and Intelligent Edge businesses that together now represents two -- 22% of our HPE total revenue. Our as-a-Service annual recurring revenue growth was an impressive 30% year over year, which underscores our momentum in enabling consumption-based IT. Our non-GAAP gross margin of 34.3% is at record level and up 210 basis points year over year. Our non-GAAP operating profit of 10.2% is up 300 basis points year over year. And our non-GAAP earnings per share of $0.46 is up 70% year over year and above the high end of our outlook range. These results contribute to Q2 free cash flow of $368 million, which is up $770 million year over year, bringing our first half fiscal year '21 free cash flow to a record $931 million. Revenue of $799 million grew 17% year over year, and operating profit expanded 320 basis points year over year. Today, our Aruba Edge Services platform already supports well over 100,000 customers with 150 new customers added every day, connecting over 1 billion active devices. Aruba and Keerti has been instrumental in accelerating this business to the $3 billion business it is today. He joined HPE in 2019 and most recently assumed the role as the General Manager of our Communications Technology Group, leading a team of more than 5,000 team members who drive $500 million in CPG-specific revenue and $3.5 billion in total revenue for HPE. In our high-performance compute and mission critical solutions business, revenue of $685 million was up 11% year over year. We continue to execute on over $2 billion in awarded contract, and we are pursuing a robust pipeline of another $5 billion in market opportunity over the next three years. As we have noted on previous calls, this is an inherently lumpy business due to the lead times between ordinary revenue recognition, but we remain on track to deliver our target of 8% to 12% annual growth in this business this year. In Compute, revenue of $3 billion was up 10% year over year. We drove strong operational performance, expanding operating margins by 550 basis points. In storage, revenue of $1.1 billion was up 3% year over year with a strong operating profit of 16.8%, up 110 basis points year over year. Our HPE's All-Flash Array portfolio grew 20%. Our annualized revenue run rate of $678 million was up 30% year over year. We saw strong total as-a-Service order growth of 41%. Over 900 go-to-market partners are now actively selling HPE GreenLake as a part of their own marketplace. And we average a 95% renewal rate with billings from those customers at 124% usage of the regional contract commitments. Our industry-leading HPE GreenLake Cloud Services experience enables us to gain more than 90 new customers during the quarter. Cash collections continue to improve, and HPE FS delivered a return on equity of 18.3%, well above prepandemic levels. At HPE, we accelerated our strategy to be the edge-to-cloud Platform-as-a-Service company to support our customers' rapidly changing needs, who have defined our 60,000 team members' demonstrated amazing agility and perseverance. We delivered Q2 revenues of $6.7 billion, up 9% from the prior-year period, a level better than our normal sequential seasonality. I am particularly proud of the fact that our non-GAAP gross margin is at the record level of 34.3%, up 210 basis points from the prior-year period and up 60 basis points sequentially. Even with our investments, our non-GAAP operating margin was 10.2%. That is up 300 basis points from our prior year, which translates to a 59% year-over-year increase in operating profit. As a result, we now expect other income and expense for the full year in fiscal year '21 to be an expense of approximately $50 million. With strong execution across the business, we ended the quarter with non-GAAP earnings per share of $0.46, up 70% from the prior year and meaningfully above the higher end of our outlook range for Q2. Q2 cash flow from operations was $822 million and free cash flow was $368 million, up $770 million from the prior year, driven by better profitability and strong operational discipline, as well as working capital benefits. This puts us at a record level of free cash flow for the first half at $931 million. Finally, we paid $156 million of dividends in the quarter and are declaring a Q3 dividend today of $0.12 per share payable in July. In Intelligent Edge, we accelerated our momentum with rich software capabilities to meet robust customer demand, delivering 17% year-over-year revenue growth across the portfolio. Switching was up 17% year over year, and wireless LAN was up 16%. We also continue to see strong operating margins at 15.5% in Q2, up 320 basis points year over year, which is the sixth consecutive quarter of year-over-year operating margin expansion. In HPC-MCS, revenue grew 11% year over year as we continue to achieve more customer acceptance milestones and deliver on our more than $2 billion of awarded contracts. We remain on track to deliver on our full-year and three-year revenue growth CAGR target of 8% to 12%. In compute, revenue grew 10% year over year and was down just 1% sequentially, reflecting much stronger-than-normal sequential seasonality. We ended the quarter with an operating profit margin of 11.3%, up 550 basis points from the prior-year period and toward the upper range of our long-term margin guidance for these segments provided at SAM. Within storage, revenue grew 3% year over year, driven by strong growth in software-defined offerings. Nimble grew 17% with ongoing strong dHCI momentum growing triple digits. All-Flash Arrays grew 20% year over year, led by Primera, that was up triple digits and is expected to surpass 3PAR sales next quarter. The mix shift toward our more software-rich platforms and operational execution helped drive storage operating profit margin to 16.8%, up 110 basis points year over year. This has been driven by the increased focus of our BU segments on selling product and service bundles, improve service intensity, and our growing as-a-Service business, which I'll remind you, enrolls service attach rates of 100%. Within HPE Financial Services, revenue was down 3% year over year as the pandemic did not materially impact this business until later in 2020. As expected, we are seeing continued sequential improvements in our bad debt loss ratios ending this quarter at just 75 basis points, which continues to be best-in-class within the industry. Our operating margin in this segment was 10.8%, up 160 basis points from the prior year and our return on equity at 18.3% is well above pre-pandemic levels and the 15%-plus target that we set at SAM. Similar to the past couple of quarters, we are making great strides in our as-a-Service offering with over 90 new enterprise GreenLake customers added. That is in Q2, bringing the total to well over 1,000. I am pleased to report that our Q2 '21 ARR was $678 million, which was up 30% year over year as reported. Total as-a-Service orders were up 41% year over year, driven by strong performance in North America and Central Europe. Based on strong customer demand and recent wins, I am very happy with how this business is executing and progressing toward achieving our ARR growth targets of 30% to 40%, a CAGR from FY '20 to FY '23. And with the operational execution of our cost optimization and resource allocation program, we have increased non-GAAP earnings per share in Q2 by 70% year over year. We delivered a record non-GAAP gross margin rate in Q2 of 34.3% of revenues, which was up 60 basis points sequentially and up 210 basis points from the prior year. You can also see we have expanded non-GAAP operating profit margin substantially from pandemic lows of -- to 10.2%, which is up 300 basis points from the prior-year period. We generated a record first half levels of cash flow with $1.8 billion of cash flow from operations and $931 million of free cash flow, which is up $1.5 billion year over year. We now expect to grow non-GAAP operating profit by 25% to 35% and deliver fiscal year '21 non-GAAP diluted net earnings per share between $1.82 and $1.94. This is a $0.09 per share improvement at the midpoint of our prior earnings per share guidance of $1.70 to $1.88 and a $0.22 per share improvement at the midpoint since SAM. For Q3 '21, we expect GAAP diluted net earnings per share of $0.04 to $0.10 and non-GAAP diluted net earnings per share of $0.38 to $0.44. Additionally, given our record levels of cash flow in the first half and raised earnings outlook, I am very pleased to announce that we are also raising FY '21 free cash flow guidance to $1.2 billion to $1.5 billion. That is a $350 million increase at the midpoint from our original SAM guidance.

And our non-GAAP earnings per share of $0.46 is up 70% year over year and above the high end of our outlook range. We delivered Q2 revenues of $6.7 billion, up 9% from the prior-year period, a level better than our normal sequential seasonality. With strong execution across the business, we ended the quarter with non-GAAP earnings per share of $0.46, up 70% from the prior year and meaningfully above the higher end of our outlook range for Q2. We now expect to grow non-GAAP operating profit by 25% to 35% and deliver fiscal year '21 non-GAAP diluted net earnings per share between $1.82 and $1.94. For Q3 '21, we expect GAAP diluted net earnings per share of $0.04 to $0.10 and non-GAAP diluted net earnings per share of $0.38 to $0.44. Additionally, given our record levels of cash flow in the first half and raised earnings outlook, I am very pleased to announce that we are also raising FY '21 free cash flow guidance to $1.2 billion to $1.5 billion.

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We also generated meaningful free cash flow with our cash balance increasing by $78 million from $374 million at December 31, 2019, to $452 million at December 31, 2020. Today, I'll focus my comments on our performance for the fourth quarter and full-year 2020, our market outlook for 2021, Oceaneering's consolidated 2021 outlook, including our expectation to generate positive free cash flow in excess of the amount generated in 2020, and EBITDA in the range of $160 million to $210 million and our business segment outlook for the full year and first quarter of 2021. For the fourth quarter of 2020, we reported a net loss of $25 million or $0.25 per share on revenue of $424 million. These results include the impact of $9.8 million for pre-tax adjustments associated with asset impairments and write-offs, restructuring and other expenses and foreign exchange losses recognized during the quarter, and $9.6 million of discreet tax adjustments. Adjusted net income was $1.8 million or $0.02 per share. We were pleased that our consolidated fourth-quarter adjusted earnings before interest taxes, depreciation, and amortization or adjusted EBITDA was $47.1 million and was sequentially higher than the third-quarter 2020 and exceeded both our guidance and consensus estimates. Fourth-quarter 2020 consolidated adjusted operating income of $9.6 million was the best quarterly performance in 2020 and $4 million higher than the third quarter. We generated $104 million of cash from operating activities. And after deducting $15 million in capital expenditures, our free cash flow was $89 million for the quarter. As a result of good operating cash flow, working capital efficiencies, and capital expenditure discipline, our cash position increased by $93.2 million during the fourth quarter of 2020. As of December 31, 2020, our cash balance stood at $452 million. Adjusted fourth-quarter operating results included recognition of approximately $3 million of cost-structure improvements achieved throughout 2020. Consequently, our SSR quarterly adjusted EBITDA margin of 33% was better than expected up from the 31% achieved during the third quarter of 2020 and consistent with the margin achieved during the first nine months of 2020. The revenue split between our remotely operated vehicle or ROV business and our combined tooling and survey businesses as a percentage of our total SSR revenue was 80% and 20% respectively compared to 82% and 18% split in the prior quarter. Our fleet utilization for the fourth quarter was 54% down from 59% in the third quarter and our days on hire declined for both drill support and vessel-based services. Average ROV revenue per day on hire of $7,325 was 1% higher as compared to the third quarter. Days on hire were 12,456 in the fourth quarter as compared to 13,601 in the third quarter. We ended the quarter and the year just as we began with a fleet count of 250 ROV systems. Our fourth-quarter fleet use was 60% in drill support and 40% for vessel-based activity as compared to 56% and 44% respectively during the third quarter. At the end of December, we had ROV contracts on 75 of the 129 floating rigs under contract or 58%, a slight market share increase from September 30, 2020, when we had ROV contracts on 76 of the 133 floating rigs under contract or 57%. Subject to quarterly variances, we continue to expect our drills support market share to generally approximate 60%. Adjusted operating income margin increased to 9% in the fourth quarter of 2020 from 5% in the third quarter of 2020 due primarily to favorable contract closeouts and supply chain savings. Our manufactured products backlog at December 31, 2020, was $266 million, compared to our September 30, 2020 backlog of $318 million. Our book to bill ratio was 0.4 for the full year of 2020, as compared with the trailing 12-month book to bill a 0.5 at September 30, 2020. For the full-year 2020, Oceaneering reported a net loss of $497 million or $5.01 per share on revenue of $1.8 billion. Adjusted net loss was $26.5 million or $0.27 per share reflecting the impact of $481 million of pre-tax adjustments, primarily $344 million associated with goodwill impairment and $102 million of asset impairments. This compared to a 2019 net loss of $348 million or $3.52 per share on revenue of $2 billion and adjusted net loss of $82.6 million or $0.84 per share. Compared to 2019, our 2020 consolidated revenue declined 11% to $1.8 billion with revenue decreases in each of our four energy segments being partially offset by the revenue increase in ADTech. ADTech's contribution to our consolidated results continues to grow representing 19% of consolidated revenue in 2020 as compared to 16% in 2019. Despite the headwinds of lower activity in our energy segments consolidated 2020 adjusted operating results and adjusted EBITDA improved by $59.6 million and $19.5 million respectively, led by our manufactured products and ADTech segments. We generated $137 million in cash flow from operations and invested $61 million in capital expenditures, resulting in free cash flow of $76 million. We ended the year with $452 million in cash. This program targeted the removal of $125 million to $160 million of costs, including depreciation. We maintained our commitment to capital discipline by reducing capital expenditures to $61 million as compared to $148 million in 2019 and we maintain focus on our core values. We achieved significant improvement in our IMDS business with adjusted operating results, improving by almost $10 million as compared to 2019. With over $250 million in contract awards during the fourth quarter of 2020 and early 2021, 45% of which is incremental business, this segment is positioned for growth in 2021. Our Subsea Robotics business, a recognized leader in world-class ROV services secured more than $225 million of contracts during the fourth quarter of 2020. The business also recorded several important incremental contract wins, including partnering with Dynetics to support their design of the Human Lunar Landing System for NASA and a contract to operate and maintain the U.S. Navy Submarine Rescue systems worth up to $119 million assuming annual renewals over a five-year period. Our total recordable incident rate or TRIR of 0.3% for 2020 is a record low for Oceaneering. EBITDA of $184 million surpassed the $165 million generated in 2019. Positive free cash flow of $76 million surpassed the $10 million generated in 2019. Cash increased to $452 million and consolidated adjusted EBITDA margin of 10% surpassed the 8% margin achieved in 2019, despite an 11% decrease in revenue. With the opex plus actions taken at the very beginning of 2021 and growing optimism associated with numerous vaccine approvals, many analysts and energy researchers are now forecasting Brent pricing to stabilize in the $55 to $60 per barrel range for 2021 and longer-term pricing to be in the $50 to $70 per barrel range. We expect Brent pricing in the $55 to $65 per barrel range will support reasonable levels of IMR activity in 2021. Similarly, we believe that longer-term Brent pricing forecast of $50 to $70 per barrel will support increased offshore project sanctioning activity in 2021. Analyst data suggests that the floating rig count has stabilized and throughout 2021 will remain close to the year-end 2020 levels of approximately 130 contracted rigs. There were 123 Tree Awards in 2020 and raise that forecasts a modest recovery to around 200 in 2021 and back into the 300 range in 2022, raise that also forecast Tree Installations of 273 in 2021, which approaches the 2020 total of 299. Also, according to raise did offer projects with an aggregate value of approximately $46 billion were sanctioned in 2020, a 53% decrease from 2019. Sanctioning levels are expected to increase in 2021 to around $55 billion and return to 2019 levels of around $100 billion in 2022. Raise that forecast global installed offshore wind capacity to increase by 11.8 gigawatts by in 2021, 37% over 2020. For the year, we anticipate generating $160 million to $210 million of adjusted EBITDA with positive operating income and adjusted EBITDA contributions from each of our operating segments. Our liquidity position at the beginning of 2021 remains robust with $452 million of cash and an undrawn $500 million revolver available until October 2021, and thereafter $450 million available until January 2023. We expect to further strengthen this position in 2021 by generating positive free cash flow in excess of the amounts generated in 2020. As has been the case over the past several years, it is our intent to continue to strengthen our balance sheet to ensure that we are well-positioned to deal with our $500 million bond maturity in November 2024. For 2021, we expect our organic capital expenditures to total between $50 million and $70 million. This includes approximately $35 million to $40 million of maintenance capital expenditures and $15 million to $30 million of growth capital expenditures. In 2021, interest expense, net of interest income is expected to be approximately $40 million and our cash tax payments are expected to be in the range of $35 million to $40 million. These cash tax payments do not include the impact of approximately $28 million of CARES Act tax refunds expected to be received in 2021. For ROVs, we expect our 2020 service mix of 62% drill support and 38% vessel services to generally remain the same through 2021. Our overall ROV fleet utilization is expected to be in the mid to high 50% range for the year with higher seasonal activity during the second and third quarters. We expect to generally sustain our ROV market share in the 60% range for drill support. At the end of 2020, there were approximately 24 Oceaneering ROVs onboard 21 floating drilling rigs with contract terms expiring during the first six months of 2021. During that same period, we expect 28 of our ROVs on 24 floating rigs to begin new contracts. For 2021, we anticipate unallocated expenses to average in the low to mid-$30 million range per quarter as we forecast higher accrual rates for projected short and long-term performance-based incentive compensation expense, as compared to 2020. For our first-quarter 2021 outlook, we expect our first-quarter 2021 adjusted EBITDA to be in the range of $45 million to $50 million on sequentially higher revenue.

For the fourth quarter of 2020, we reported a net loss of $25 million or $0.25 per share on revenue of $424 million. Adjusted net income was $1.8 million or $0.02 per share. We expect to further strengthen this position in 2021 by generating positive free cash flow in excess of the amounts generated in 2020. For our first-quarter 2021 outlook, we expect our first-quarter 2021 adjusted EBITDA to be in the range of $45 million to $50 million on sequentially higher revenue.

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Payveris serves over 265 national institutions. And what that means to Paymentus is that this allows us to accelerate our IPN strategy for banks by having nearly 300 financial institutions join our network. In addition to that opportunity, there is another equally exciting opportunity where each of these nearly 300 FIs can be direct billers on our platform, which will add to our existing base of direct billers. Revenue grew 30% over the same period in 2020 to $93.5 million. Q2 contribution profit grew 25% to $37.4 million. Adjusted gross profit in the quarter was $30.1 million, which was a 24% increase over Q2 of last year. And the transaction processed grew over 39% year over year. In the second quarter, we also continue to build on our more than 350 integrations divisions by adding new partners, including completing an integration with a leading provider of software to midsized telecommunication companies. Two examples of expansion are a large utility with over 2 million customers, which added advanced payment methods like PayPal to provide their customers with more choices. We are also really excited about IPN across -- other IPN partners, and especially, our extended reach to nearly 300 financial institutions with the Payveris transaction. For example, we would receive a $1.50 for a utility payment of $50 and the same $1.50 for a payment of $275. We processed $64.2 million transactions, representing a year-over-year increase of approximately 39%. This transaction growth drove a 30.3% increase in revenue over the same period in 2020, which resulted in revenue of $93.5 million. Contribution profit for Q2 was $37.4 million, a 24% increase over the same period last year. Adjusted gross profit for the second quarter was $30.1 million and this was an increase of 24% from Q2 of 2020. Adjusted EBITDA was $8.3 million, which represents a 22.2% margin on contribution profit. The 5% decline in adjusted EBITDA from the second quarter of 2020 is due to cost increases related to being a public company, as well as increased investments in R&D and sales and marketing. Operating expenses rose $7.8 million to $24.8 million for Q2 of 2021. R&D expense increased $1.9 million or 32.4% as we continue to invest in new features and functions in our payments platform and we build out IP with additional partners. Over half of the operating expense increase, or $4 million, was in G&A and was driven by public company cost, as well as continuing to build out the public company infrastructure. Sales and marketing increased $1.9 million or 24.5% as we ramped up selling activity relative to the same time last year in the middle of the COVID uncertainty. These two one-time tax items totaled approximately $2 million or about $1 million each. As a result of these two discreet one-time items that hit GAAP tax expense in our Q2, our effective tax rate for the quarter was approximately 86%. Excluding these two discreet one-time tax items, our net income for the quarter would have been $2.6 million. As of June 30, 2021, we had $266.4 million of cash and cash equivalent on our balance sheet. Inclusive of our Payveris and Finovera acquisitions, our revenue outlook for 2021 is in the range of $378 million to $382 million, which represents growth between 25% and 27% year over year. For contribution profit, our full-year outlook is between $152 million and $154 million, or approximately 26% to 28% growth. For full-year 2021, we also see adjust EBITDA in the range of $25 million to $28 million, with an adjusted EBITDA margin of 16.5% to 18.5% on contribution profit. However, as a result of the items mentioned for Q2, we expect that our full-year effective tax rate for 2021 will be approximately 47%.

This transaction growth drove a 30.3% increase in revenue over the same period in 2020, which resulted in revenue of $93.5 million. Inclusive of our Payveris and Finovera acquisitions, our revenue outlook for 2021 is in the range of $378 million to $382 million, which represents growth between 25% and 27% year over year.

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Our third quarter GAAP earnings per share was $0.71, while adjusted earnings per share was $0.13, $0.05 over a $0.08 performance in the comparable prior year period, reflecting strong execution across our diversified business and increased margins at UGI International. On a year-to-date basis, our GAAP earnings per share of $4.48 and adjusted earnings per share of $3.30 represent record earnings through the first three quarters of the fiscal year. During the Q2 earnings call, we shared the revised earnings per share guidance of $2.90 to $3 for this fiscal year. These investments, which are primarily focused on replacement of cast iron and bare steel, are expected to drive continued reliable earnings growth as our PA utility has seen a rate base CAGR of 11.4% over the past five years. The Utilities team also continues to focus on adding new customers across our system with more than 2,200 new residential heating and commercial customers added in Q3 and roughly 10,000 added on a year-to-date basis. We are confident that this will allow us to continue to deliver long-term earnings per share growth of 6% to 10% and 4% dividend growth. We delivered adjusted diluted earnings per share of $0.13, an increase of $0.05 over the prior year fiscal quarter. Our reportable segments had EBIT of $98 million compared to $81 million in the prior year. As you can see, our adjusted diluted earnings exclude a number of items such as: the impact of mark-to-market changes in commodity hedging instruments, a gain of $1.09 this year versus $0.55 in the third quarter of fiscal 2020. Last year, we recorded an $0.18 impairment of our ownership interest in the Conemaugh Station. Also last year, we had a $0.02 loss on foreign currency derivative instruments. We adjusted out $0.07 of expenses associated with our LPG business transformation initiatives compared to $0.02 in the prior year. Lastly, we had a $0.44 impairment related to our PennEast assets. Looking at our year-over-year quarterly performance, this chart provides some additional color to the $0.05 improvement in earnings we achieved versus the prior year period. This performance was largely due to higher volumes at our international LPG business on weather that was almost 55% colder than prior year. At the corporate level, we saw a $0.15 decrease versus the prior year period, largely due to CARES Act tax benefits that were realized last year. When we shared our revised FY 2021 guidance range of $2.90 to $3, we noted that this included $0.10 of anticipated COVID headwind in tax benefits of roughly $0.12 from CARES and other strategic tax planning actions. Delivering at the top end of our guidance range and given our year-to-date non-GAAP results of $3.30, we expect that Q4 will see a sizable reduction that is primarily driven by tax items when compared to the prior year period. AmeriGas reported EBIT of $11 million compared to $19 million in the prior year. There was a slight increase in total retail volume driven by an 18% increase in national account volumes in comparison to the prior year period. This volume increase fully offset a 19% decrease in cylinder exchange volume that we saw as sales normalized after a significant uptick in Q3 of FY 2020. When compared to 2019 third quarter, there was a 5% increase in cylinder exchange volume this quarter. Overall, the business saw a decline of $14 million in total margin that was largely attributable to customer mix. Other income increased by $7 million, largely due to higher finance charges, which were suspended in response to the COVID pandemic in the prior year period and onetime gains on asset sales in the current period. UGI International generated EBIT of $41 million compared to $21 million in fiscal 2020. Retail volumes increased by 21%, largely due to the significantly colder than prior year weather that I described earlier. This increase in bulk and cylinder volumes drove the higher total margin and offset the slightly lower unit margins given the 81% increase in average wholesale propane prices over prior year. We saw roughly an $18 million or 86% improvement in the year-over-year constant currency performance in EBIT. Midstream & Marketing reported EBIT of $21 million, which was fairly consistent with fiscal 2020. UGI Utilities delivered a strong performance for the quarter and reported EBIT of $25 million, $4 million higher than the prior fiscal year. Cash flows remained strong with a 9% increase in the year-to-date cash provided by operating activities over the corresponding prior year period. As of the end of the quarter, UGI had available liquidity of $2.4 billion, approximately $800 million more than the prior year period. Our next step will be to file a proposed order by August 10, seeking the commission's approval. Under the terms of the settlement agreement, the Electric division would be permitted to increase base rates by $6.15 million, and we anticipate new rates going into effect in November 2021. Separately, the second phase of the gas base rate increase of $10 million went into effect on July 1. During the quarter, we launched Cynch in three additional markets, bringing the total to 23 cities across the U.S. As we look forward to the remaining quarter in this fiscal year and fiscal year 2022, we are pleased with the strong year-to-date performance and the investment opportunities available to us as we execute on our strategy. I remain confident that we're well positioned both strategically and financially to continue executing and delivering reliable long-term earnings per share growth of 6% to 10% and return capital to shareholders through a robust dividend that we expect to grow at 4% over the long term.

Our third quarter GAAP earnings per share was $0.71, while adjusted earnings per share was $0.13, $0.05 over a $0.08 performance in the comparable prior year period, reflecting strong execution across our diversified business and increased margins at UGI International. During the Q2 earnings call, we shared the revised earnings per share guidance of $2.90 to $3 for this fiscal year. We delivered adjusted diluted earnings per share of $0.13, an increase of $0.05 over the prior year fiscal quarter.

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Operating income of $346 million was well ahead of last year with growth coming from both our reported segments. The Motorcycles and Related Products segment delivered $228 million which is $143 million better than last year, driven by units, a stronger product mix with growth in our Touring and Cruiser families and lower operating expense versus a year ago. The Financial Services segment delivered $119 million of operating income, $96 million better than last year due to lower actual losses and a lower loss provision. We delivered earnings per share of $1.68 with no significant restructuring charges taken within the quarter. The TAM declines were driven by a 30% net reduction in the number of dealers and price increases taken across the portfolio as we work to restore profitability within those markets. Across the dealer network, worldwide retail inventory of new motorcycles was down 48% versus a year ago behind our strategic shift on supply and inventory management. Inventories were up 60% over Q4 as we work to build back inventory ahead of riding season. Looking at revenue, total motorcycle segment revenue was up 12% in Q1, 3 points of this growth came from volume on motorcycle units and parts and accessories as we benefited from the retiming of the new model year launch and the lapping of the 2020 COVID shutdowns. And finally, we realized 6 points of growth from mix as the increased contribution from Touring more than offset the unit declines in our less profitable small cruiser models. Absolute gross margin percent of 34.1% was up 5.1 points versus prior year driven by stronger volume, favorable mix and the lapping of heavier promotional periods in Q1 of last year. Total operating margin of 18.5% was up significantly versus prior year due to the drivers already noted, lower operating expense. The Financial Services segment operating income in Q1 was $119 million, up over $95 million compared to last year. The total provision for credit losses decreased $102 million from Q1 2020 driven by an allowance decrease of $82 million and lower actual credit losses of $20 million. Focusing in on HDFS' base business, new retail originations in Q1 were up 25.8% versus last year behind higher new motorcycle sales as well as strong used motorcycle origination volume. Market share for new U.S. retail financing remains strong at 63.5%. At the end of Q1 2021, HDFS had approximately $1.7 billion in cash and cash equivalents on hand and approximately $1.6 billion in availability under its committed credit and conduit facilities for total available liquidity of $3.3 billion. Cash and cash equivalents remained elevated, but were down approximately $800 million from Q4 2020 levels as we gradually pull cash back down to normalized levels. HDFS continues to manage its debt to equity ratio between 5 times and 7 times, and well within the debt covenants of no higher than 10 to 1. HDFS' retail 30-day plus delinquency rate was 2.14%, down 123 basis points compared to the first quarter of last year. The retail credit loss ratio was also favorable at 1.4%, a 133 basis point improvement over last year. Wrapping up with Harley-Davidson, Inc financial results, we delivered first quarter operating cash flow of $163 million, up $171 million over prior year. Cash and cash equivalents ended the quarter at $2.3 billion, which is $856 million higher than Q1 last year, but $937 million less than the end of Q4 2020 as we gradually worked down the higher cash balances that were held in the face of the pandemic. Finally, the Company's Q1 effective income tax rate was 24%, slightly lower than Q1 2020. Finally, we have also been able to get a much better read on profitable demand for our new model year '21 motorcycles, which is stronger than we had anticipated, particularly in our most profitable segments of Touring and large Cruiser. As a result of these factors, we are raising our motorcycle segment revenue growth to be 30% to 35%, an increase from the previously communicated growth range of 20% to 25%. Moving on to Motorcycle segment operating income margins, assuming a successful outcome regarding the EU tariff situation, our updated guidance is a range of 7% to 9%, up from the previously communicated range of 5% to 7%. This 200 basis point increase reflects an improved demand outlook and confidence in our ability to continue navigating through the global supply chain headwinds. However, if we are unable to reach resolution, negating the additional EU tariffs, the impact would bring us back to our original guidance of 5% to 7%. The Financial Services segment operating income growth guidance is now 50% to 60%, an increase from the previously communicated range of 10% to 15% driven primarily by the loss provision adjustment. Lastly, capital expenditures guidance remains flat to our original guidance of $190 million to $220 million. We expect approximately 60% of our revenue to come in the first half of the year as we ride the momentum of our model year launch through the riding season. It's in our DNA, it's embedded in our vision and it's at the heart of our mission and it's part of our 118 year legacy. As we begin to execute against our strategy of 70:20:10 skewed to our stronghold segments of Touring, large Cruiser and Trike, we will work hard to continue to solidify our position as leaders, acknowledging that these segments are the most attractive of the global market in terms of our profit focus. Produced only once, each model will have a limited serialized production run of 1,500 bikes and deliver on what Harley-Davidson has always done so well; Iconic design and historic moments. Pan America was launched globally on February 22nd at a virtual launch viewed by over 350,000 participants across the world. To date, the Pan America has received widespread global media acclaim with over 2 billion media impressions at a 97% positive media sentiment. To date, over 350 of our U.S. dealers have signed up to the program representing 63% of the U.S. dealer network on the day of launch. Each certified pre-owned motorcycle will be sold with a 12 month limited warranty on the engine and transmission and will include a 12 month complimentary membership in HOG, our Owners Group. With 118 years of uninterrupted heritage, craftsmanship and iconic design, we are unique.

We delivered earnings per share of $1.68 with no significant restructuring charges taken within the quarter. Looking at revenue, total motorcycle segment revenue was up 12% in Q1, 3 points of this growth came from volume on motorcycle units and parts and accessories as we benefited from the retiming of the new model year launch and the lapping of the 2020 COVID shutdowns. Finally, we have also been able to get a much better read on profitable demand for our new model year '21 motorcycles, which is stronger than we had anticipated, particularly in our most profitable segments of Touring and large Cruiser. As a result of these factors, we are raising our motorcycle segment revenue growth to be 30% to 35%, an increase from the previously communicated growth range of 20% to 25%. Moving on to Motorcycle segment operating income margins, assuming a successful outcome regarding the EU tariff situation, our updated guidance is a range of 7% to 9%, up from the previously communicated range of 5% to 7%. The Financial Services segment operating income growth guidance is now 50% to 60%, an increase from the previously communicated range of 10% to 15% driven primarily by the loss provision adjustment. Lastly, capital expenditures guidance remains flat to our original guidance of $190 million to $220 million. Each certified pre-owned motorcycle will be sold with a 12 month limited warranty on the engine and transmission and will include a 12 month complimentary membership in HOG, our Owners Group.

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But now, with macro factors having become tailwinds instead of headwinds, we can see just how meaningful our work over the last 20 months has been for our company in delivering strong results and creating value for our stakeholders. In addition, the Chinese government's mandate to keep steel production growth at 0% compared to 2020 has led to drastic cuts in steel production. As recently reported by the World Steel Association, global pig iron production increased by 3.4% for the first nine months of the year, with China decreasing 1.3%. Excluding China, the rest of the world's production grew at an impressive rate of 13.9%. During the third quarter, the Platts PLV, FOB Australia index price experienced a meteoric rise of $191 per metric ton, rising from $198 on July 1 to a high of $389 per metric ton at the end of September. Likewise, the PLV CFR China indices increased by $295 per metric ton from $309 to a high of $604 per metric ton. However, the majority of the rapid rise in pricing occurred in the final six weeks of the quarter, during which the PLV FOB Australian indices rose by $162 per metric ton, equivalent to 85% of the total increase for the third quarter. This also occurred with the PLV CFR China indices rising by $232 per metric ton in the final six weeks, equivalent to 79% of the total increase for the third quarter. Sales volume in the third quarter was 1.1 million short tons compared to 1.9 million short tons in the same quarter last year. Our sales by geography in the third quarter were 47% into Europe, 4% into South America and 49% into Asia. The higher, the normal sales to Asia were primarily driven by Chinese demand that we capitalized upon during the third quarter while capturing 100% of the CFR China index price on the day of the sale. Production volume in the third quarter of 2021 was 1.1 million short tons compared to 1.9 million short tons in the same quarter of last year. The tons produced in the third quarter resulted from running both longwalls at Mine 7 plus four continuous mining years. Mine 4 remained idle during the third quarter. Our gross price realization for the third quarter of 2021 was 81% of the Platts Premium Low Vol FOB Australian index price, and was lower than the 90% achieved in the prior year period. Our spot volume in the third quarter was approximately 30% of total volumes and 38% year-to-date. Our normal expectation of spot volume is approximately 20%. In contrast, this year, our third quarter results were negatively impacted by the UMWA strike in which we idled Mine 4 and significantly reduced operations at Mine 7. In the third quarter of 2021, the company recorded its largest net income in over two years on a GAAP basis of approximately $38 million or $0.74 per diluted share compared to a net loss of $14 million or $0.28 per diluted share in the same quarter last year. Non-GAAP adjusted net income for the third quarter, excluding the nonrecurring business interruption expenses, idle mine expenses and other nonrecurring income was $0.97 per diluted share compared to a loss of $0.28 per diluted share in the same quarter last year. Adjusted EBITDA was $105 million in the third quarter of 2021, the largest in over two years as compared to $17 million in the same quarter last year. The quarterly increase was primarily driven by a 108% increase in average net selling prices, partially offset by a 45% decrease in sales volume. Our adjusted EBITDA margin was 52% in the third quarter this year compared to 9% in the same quarter last year. Total revenues were approximately $202 million in the third quarter compared to $180 million in the same quarter last year. This increase was primarily due to the 108% increase in average net selling prices, offset partially by 45% lower sales volume in the third quarter versus the same period last year. In addition, other revenues were negatively impacted in the third quarter this year by a noncash mark-to-market loss on our gas hedges of approximately $6 million which were entered into earlier this year before hurricane season and gas supply deficits. The Platts Premium Low Vol FOB Australian Index price averaged $129 per metric ton higher, were up 130% in the third quarter compared to the same quarter last year. The index price averaged $264 per metric ton for the quarter. Demurrage and other charges reduced our gross price realization to an average net selling price of $189 per short ton in the third quarter this year compared to $91 per short ton in the same quarter last year. Cash cost of sales was $91 million or 46% of mining revenues in the third quarter compared to $151 million or 86% of mining revenues in the same quarter last year. The decrease in total dollars was primarily due to a $68 million impact of lower sales volume, partially offset by $8 million of higher variable costs associated with price-sensitive transportation and royalty costs. Cash cost of sales per short ton, FOB port, was approximately $86 in the third quarter compared to $78 in the same quarter last year. Depreciation and depletion expenses for the third quarter of this year were $29 million compared to $28 million in last year's third quarter. The net increase of $1 million was primarily due to two things. First, the immediate recognition of $8 million of expense related to Mine 4 depreciation that would have normally been capitalized as inventory as it was produced. However, since Mine 4 is currently idled, it was instead directly expensed. Second, these expenses were lower by $7 million due to the 45% decrease in sales volume. SG&A expenses were about $7 million or 3.7% of total revenues in the third quarter of 2021 and were lower than the same quarter last year, primarily due to lower employee related expenses and lower professional fees. During the third quarter, we incurred incremental nonrecurring business interruption expenses of $7 million directly related to the ongoing UMWA strike. As a result of the ongoing UMWA strike that began April 1, we idled Mine 4 in the second quarter. We incurred $9 million of expenses in the third quarter associated with the idiling of Mine 4 and reduced operations at Mine 7. Net interest expense was about $9 million in the third quarter includes interest on our outstanding debt, interest on equipment financing leases, plus amortization of our debt issuance costs associated with our credit facilities, partially offset by interest income. We recorded income tax expense of $5 million during the third quarter of this year compared to a benefit of $8 million in the same quarter last year. During the third quarter of 2021, we generated $52 million of free cash flow, which resulted from cash flows provided by operating activities was $63 million less cash used for capital expenditures and mine development cost of $11 million. Free cash flow in the third quarter of this year was negatively impacted by an $18 million increase in net working capital. Cash used in investing activities for capital expenditures and mine development costs were $11 million during the third quarter of this year compared to $28 million in the same quarter last year. Cash flows used by financing activities were $51 million in the third quarter of 2021 and consisted primarily of payments on our ABL facility at $40 million, payments for capital leases of $8 million, and the payment of the quarterly dividend of $3 million. Our total available liquidity at the end of the third quarter was $356 million, representing a 24% increase over the second quarter and consisted of cash and cash equivalents of $268 million and $87 million available under our ABL facility. This is net of outstanding letters of credit of approximately $9 million. Our balance sheet has a leverage ratio of 0.6 times adjusted EBITDA. We believe we are well positioned to fulfill our customer volume commitments for 2021 of approximately 4.9 million to 5.5 million short tons through a combination of existing coal inventory and expected production during the fourth quarter. If we're able to reach an agreement soon with the union, we believe that we could ramp to a run rate of production of approximately 7.5 million short tons in about three to four months. If we are unable to reach a contract with the union in the near term, we believe our production and sales volume to be between 5.5 million and 6.5 million short tons. This could possibly include restarting the Mine 4 longwall as early as January with a small number of crews working on limited shift schedule. We have recently started in the fourth quarter one continuous mining we did at Mine 4.

In contrast, this year, our third quarter results were negatively impacted by the UMWA strike in which we idled Mine 4 and significantly reduced operations at Mine 7. In the third quarter of 2021, the company recorded its largest net income in over two years on a GAAP basis of approximately $38 million or $0.74 per diluted share compared to a net loss of $14 million or $0.28 per diluted share in the same quarter last year. Non-GAAP adjusted net income for the third quarter, excluding the nonrecurring business interruption expenses, idle mine expenses and other nonrecurring income was $0.97 per diluted share compared to a loss of $0.28 per diluted share in the same quarter last year. As a result of the ongoing UMWA strike that began April 1, we idled Mine 4 in the second quarter. We incurred $9 million of expenses in the third quarter associated with the idiling of Mine 4 and reduced operations at Mine 7. We believe we are well positioned to fulfill our customer volume commitments for 2021 of approximately 4.9 million to 5.5 million short tons through a combination of existing coal inventory and expected production during the fourth quarter.

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To frame my comments in the appropriate context, it is important to note that despite initial concerns expressed by those who viewed the pandemic through the lens of the Global Financial Crisis, over the past 11 months the capital markets have remained functioning and experienced an historically rapid recovery. During 2020, ARI sold approximately $634 million of loans at a weighted-average price of 98.1% of par, generating net proceeds of $208 million. As a result, we repurchased over $128 million of common stock at an average price of $8.61, resulting in approximately $0.61 per share of book value accretion. I also want to highlight that yesterday we announced our board of directors authorized a $150 million increase to ARI's share repurchase plan, providing us with total capacity of $172 million. Anecdotally, with respect to our loans underlying the hospitality assets, we continue to see steady improvement within the roughly 65% of our portfolio which are resort or destination locations, while business-oriented hotels continue to face challenges. From March 15 of last year, total deleveraging on our $3.5 billion financing arrangements were $190 million, which is less than 6% of our outstanding balance. Our strong relationships with key counterparties were beneficial as we navigated volatility in the capital markets throughout the past 11 months. For the fourth quarter of 2020, our distributable earnings prior to realized loss on investments were $51 million, or $0.36 per share of common stock. Distributable earnings were $21 million, or $0.15 per share, and the realized loss on investments was comprised of $25 million in previously recorded specific CECL reserves and $5 million on loan sales and restructurings. GAAP net income available to common stockholders was $33 million, or $0.23 per share, and the common stock dividend for the quarter was $0.35 per share. As of December 31, our General CECL Reserve remained relatively unchanged, declining by three basis points to 68 basis points, and our total CECL reserve now stands at 3.24% of our portfolio. GAAP book value per share prior to the General CECL Reserve was $15.38, as compared to $15.30 at the end of the third quarter. Since the end of the first quarter of last year, our book value prior to General CECL Reserve increased by $0.44 per share. At quarter-end, our $6.5 billion loan portfolio had a weighted-average unlevered yield of 6.3% and a remaining fully extended term of just under three years. Approximately 90% of our floating-rate U.S. loans have LIBOR floors that are in the money today, with a weighted-average floor of 1.46%. We completed $109 million of add-on fundings during the quarter for previously closed loans, bringing our total add-on fundings to $413 million for 2020. As of today, we have $250 million of cash on hand, $30 million of approved undrawn credit capacity and $1.1 billion in unencumbered loan assets.

I also want to highlight that yesterday we announced our board of directors authorized a $150 million increase to ARI's share repurchase plan, providing us with total capacity of $172 million. GAAP net income available to common stockholders was $33 million, or $0.23 per share, and the common stock dividend for the quarter was $0.35 per share.

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We achieved organic revenue growth of 10% in the fourth quarter, with double-digit growth in commercial risk and reinsurance, driven by net new business generation and client retention. Our full year organic revenue growth of 9% reflects the strength and momentum of our Aon United strategy, which is designed to drive top and bottom-line results. To that point, operating income increased 17% year over year. Full year operating margins expanded 160 basis points to 30.1%, with margins of 32.8% in the fourth quarter, reflecting ongoing efficiency improvements, net of investment and long-term growth. Earnings per share increased 22% for the full year, free cash flow exceeded $2 billion and we completed $3.5 billion of share buyback in 2021, a strong indication of our confidence in the long-term value of the firm. This work has been formed by 20 years of enrollment data from over 4 million participants, which enables us to rapidly develop bespoke solutions for our clients that strengthen their total rewards offering and reinforce their human capital strategy at a time when this has never been more essential. In the quarter, we delivered 10% organic revenue growth, the third consecutive quarter of double-digit organic growth, which translated into double-digit adjusted operating income and adjusted earnings-per-share growth, continuing our momentum as we head into 2022. As I reflect on full year results, first, organic revenue growth was 9%, including double-digit growth in commercial risk solutions and health solutions. I would note that total revenue growth of 10% includes a modest favorable impact from change in FX, partially offset by the impact of certain divestitures completed within the year. We delivered substantial operational improvement, with adjusted operating income growth of 17% and adjusted operating margin expansion of 160 basis points to a record 30.1% margin. The investments we have made in Aon Business Services give us further confidence in our ability to expand margins, building on our track record of approximately 100 basis points average annual margin expansion over the last decade. We translated strong adjusted operating income growth into double-digit adjusted earnings per share growth of 22% for the full year, building on our track record of double-digit adjusted earnings per share growth over the last decade. As noted in our earnings materials, FX translation was an unfavorable impact of approximately $0.03 in the fourth quarter and was a favorable impact of roughly $0.23 per share for the full year. If currency will remain stable at today's rates, we would expect an unfavorable impact of approximately $0.16 per share or approximately $48 million decrease in operating income in the first quarter of 2022. In addition, we expect noncash pension expense of approximately $11 million for full year 2022 based on current assumptions. This compares to the $21 million of noncash pension income recognized in 2021. In 2021, free cash flow decreased 23% to $2 billion reflecting strong revenue growth, margin expansion and improvements in working capital, which were offset by $1 billion termination fee payment and other related costs. I'd observe that excluding the $1 billion termination fee payment, free cash flow grew $400 million or approximately 15% from $2.6 billion in 2020. Given this outlook, we expect share repurchase to continue to remain our highest return on capital opportunity for capital allocation as we believe we are significantly undervalued in the market today, highlighted by the approximately $2 billion of share repurchase in the quarter and $3.5 billion of share repurchase in 2021. We expect an investment of $180 million to $200 million. We ended 2021 with a return on capital of 27.4%, an increase of more than 1,500 basis points over the last decade. In addition, we issued $500 million of senior notes in Q4. Our net unfunded -- funded pension balance improved by nearly $500 million in 2021, reflecting continued progress and a result of the steps we've taken over the last decade to derisk this liability and reduce volatility. We returned nearly $4 billion to shareholders through share repurchase and dividends in 2021.

We returned nearly $4 billion to shareholders through share repurchase and dividends in 2021.

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We continue to retain about 80% of digital sales but have now recovered nearly 80% of in-restaurant sales. For the quarter, we reported record quarterly sales of $2 billion, representing 21.9% year-over-year growth, which was fueled by a 15.1% increase in comparable restaurant sales. Restaurant level margin of 23.5% was 400 basis points higher than the 19.5% we reported last year. Earnings per share adjusted for unusual items of $7.02, representing an increase of 86.7% year-over-year. Digital sales growth of 8.6% year-over-year, representing 42.8% of sales and we opened 41 new restaurants, including 36 with a Chipotlane. While we regularly get asked, what's next, I believe our current growth drivers have plenty of runway and will be critical to us reaching our longer-term goal of 6,000 restaurants in North America with AUVs above $3 million and improving returns on invested capital. Over the past 18 months, we've made operational adjustments to adapt to our constantly changing environment in support of our in-restaurant business as well as our record-breaking digital business. Our frontline represented nearly 60% of our business or $1.1 billion of sales for the quarter. During the third quarter, digital sales grew nearly 9% year-over-year to $840 million and represented 43% of sales. In fact, our year-to-date digital sales of nearly $2.7 billion are just slightly below the $2.8 billion we achieved during all of last year. Currently, about 65% of our guest use in-restaurant as their main access point, nearly 20% use digital as their primary channel, and the remaining 15% to 20% use both channels. Speaking of the loyalty program, we're excited to have more than 24.5 million members, many of whom are new to the brand. For example, we use numerous campaigns to stay relevant via important sporting events such as the basketball championships, where we hit $1 million worth of free burritos in our TV advertising. We're pleased to report solid third quarter results with sales growing 21.9% year-over-year to $2 billion as comp sales grew 15.1%. Restaurant level margin of 23.5% expanded 400 basis points over last year, and earnings per share adjusted for unusual items was $7.02, representing 86.7% year-over-year growth. The third quarter had a GAAP tax benefit that I'll discuss shortly, which is partially offset by expenses related to a previously disclosed modification to our 2018 performance share and transformation expenses, which netted to positively impact our earnings per share by $0.16 leading to GAAP earnings per share of $7.18. But given our strong underlying business momentum, we expect our comp to be in the low-to-mid double digits, which is encouraging considering that will be about 200 basis points less than pricing contribution during Q4 versus Q3 as we've lap some of our delivery menu price increases. Our supply chain team has done an outstanding job, navigating the numerous industrywide disruption, which led to food costs being 30.3% in Q3, a decrease of 200 basis points from last year. In addition, Q4 will also include the higher cost brisket LTO, which collectively will result in our food costs being in the low-31% range for the quarter. Labor costs for the third quarter were 25.8%, an increase of about 40 basis points from last year. This increase was driven by our strategy to increase average nationwide wages to $15 per hour, which is partially offset by menu price increases, sales leverage, and a one-time employee retention credit. Given ongoing elevated wage inflation and greater new unit openings, we expect labor costs to be in the mid-26% range in Q4. Other operating costs for the quarter were 15.1%, a decrease of 170 basis points from last year due primarily to price and sales leverage. Marketing and promo costs for the quarter were 2.4%, about 20 basis points lower than we spent last year. As a result, we anticipate marketing expense to be around 4% in Q4 to support Smoked Brisket and for the latest brand messaging under our Behind The Foil campaign. For the full year 2021, marketing expense is expected to remain right about 3% of sales. Overall, other operating costs are expected to be in the mid-16% range for the fourth quarter. Looking at overall restaurant margins, we expect Q4 to be in the 20% to 21% range. Our Q4 underlying margin would be around 22% when you normalize marketing spend and remove the temporary headwind from the brisket LTO. G&A for the quarter was $146 million on a GAAP basis or $137 million on a non-GAAP basis, including $7.6 million for the previously mentioned modification for 2018 performance shares, and $1.6 million related to transformation and other expenses. G&A also includes about $100 million in underlying G&A, about $28 million related to non-cash stock compensation, about $8.5 million related to higher performance-based bonus accruals and payroll taxes and equity vesting, and stock option exercises, and roughly, $600,000 related to our upcoming all-manager conference. Looking to Q4, we expect our underlying G&A to be right around $101 million as we continue to make investments primarily intact to support ongoing growth. We anticipate stock comp will likely be around $27 million in Q4, although this amount could move up or down based on our actual performance. We also expect to recognize around $5.5 million related to performance-based bonus expense and employer taxes associated with shares that vest during the quarter as well as about $1.5 million related to our all-manager conference. Our effective tax rate for Q3 was 14.7% on a GAAP basis and 19.7% on a non-GAAP basis. For Q4, we continue to estimate our underlying effective tax rate to be in the 25% to 27% range, though it may vary based on discrete items. Our balance sheet remains healthy as we ended Q3 with $1.2 billion in cash, restricted cash and investments with no debt along with a $500 million untapped revolver. During the quarter, we repurchased $99 million of our stock at average price of $1,813 and we expect to continue using excess free cash flow to opportunistically repurchase our stock. During Q3, despite a few delays in opening timeline, we opened 41 new restaurants with 36 of these including a Chipotlane. In fact, we currently have more than 110 restaurants under construction, and while timing is somewhat unpredictable, this gives us confidence in ending the year at or slightly above the 200 new restaurants with now more than 75% including a Chipotlane versus our prior expectation of 70%. As of September 30th, we had a total of 284 Chipotlanes, including 12 conversions and 8 relocations.

For the quarter, we reported record quarterly sales of $2 billion, representing 21.9% year-over-year growth, which was fueled by a 15.1% increase in comparable restaurant sales. Restaurant level margin of 23.5% was 400 basis points higher than the 19.5% we reported last year. Earnings per share adjusted for unusual items of $7.02, representing an increase of 86.7% year-over-year. Digital sales growth of 8.6% year-over-year, representing 42.8% of sales and we opened 41 new restaurants, including 36 with a Chipotlane. We're pleased to report solid third quarter results with sales growing 21.9% year-over-year to $2 billion as comp sales grew 15.1%. Restaurant level margin of 23.5% expanded 400 basis points over last year, and earnings per share adjusted for unusual items was $7.02, representing 86.7% year-over-year growth. The third quarter had a GAAP tax benefit that I'll discuss shortly, which is partially offset by expenses related to a previously disclosed modification to our 2018 performance share and transformation expenses, which netted to positively impact our earnings per share by $0.16 leading to GAAP earnings per share of $7.18. But given our strong underlying business momentum, we expect our comp to be in the low-to-mid double digits, which is encouraging considering that will be about 200 basis points less than pricing contribution during Q4 versus Q3 as we've lap some of our delivery menu price increases. Our supply chain team has done an outstanding job, navigating the numerous industrywide disruption, which led to food costs being 30.3% in Q3, a decrease of 200 basis points from last year. Other operating costs for the quarter were 15.1%, a decrease of 170 basis points from last year due primarily to price and sales leverage. For Q4, we continue to estimate our underlying effective tax rate to be in the 25% to 27% range, though it may vary based on discrete items. In fact, we currently have more than 110 restaurants under construction, and while timing is somewhat unpredictable, this gives us confidence in ending the year at or slightly above the 200 new restaurants with now more than 75% including a Chipotlane versus our prior expectation of 70%.

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Orders were robust, up 42%, with growth in all segments in both services and equipment, reflecting continued demand for our technology and solutions and better commercial execution. We saw a continued strength in services, up 7% organically. Equipment was down 9% organically, largely due to supply chain disruptions, the Ford ventilator comparison in healthcare, and as expected, lower power equipment. Adjusted Industrial margin expanded 270 basis points organically, largely driven by operational improvement in many of our businesses, growth in higher-margin services at Aviation and Power, and net restructuring benefits. Industrial free cash flow was up $1.8 billion ex discontinued factoring programs due to better earnings, working capital, and the short-term favorable timing impact of aircraft delivery delays. Departure trends are better than the August dip and have recovered to down 23% of '19 levels. For example, at Aviation's overhaul shops, our teams have used lean to increase turnaround time by nearly 10% and decrease shop inventory levels by 15% since the fourth quarter of 2020. The team used value stream mapping, standard work and quarterly Kaizens to reduce production lead time once parts are received by more than 40% from a year ago. And there's line of sight there to another 25% reduction by the end of the year. Looking further out to next year, as our businesses continue to strengthen, we expect revenue growth, margin expansion, and higher free cash flow despite the pressures that we're managing through currently. Moving on to Slide 3. We'll use the proceeds to further reduce debt, which we now expect to reach approximately $75 billion since the end of 2018. This quarter, we hosted our global Kaizen week in each of our businesses, with over 1,600 employees participating. There are many recent wins across GE this quarter, but to highlight one, our Gas Power team delivered, installed, and commissioned four TM2500 aeroderivative gas turbines in only 42 days to complement renewable power generation for California's Department of Water Resources during peak demand season. For example, at renewables, our Haliade-X offshore wind turbine prototype operating in the Netherlands, set an industry record by operating at 14 megawatts, more output than has ever been produced by any wind turbine. Not only does BK expand our high-performing $3 billion Ultrasound business, but it also is growing rapidly with attractive margins itself. In addition to Kaizen week that Larry mentioned, over 1,800 finance team members completed a full waste work week, applying lean and digital tools to reduce nonvalue-added work by 26,000 hours and counting. Orders were robust, up 42% year over year and up 21% sequentially on a reported basis, building on revenue momentum heading into '22. Year over year, total margins expanded 270 basis points, driven by our lean efforts, cost productivity, and services growth. Finally, adjusted earnings per share was up 50% year over year, driven by Industrial. However, due to our continued improvement across GE, we are raising our '21 outlook for organic margin expansion to 350 basis points or more and our adjusted earnings per share to a range of $1.80 to $2.10. Industrial free cash flow was up $1.8 billion ex discontinued factoring programs in both years. Receivables were a source of cash, up $1.3 billion year over year ex the impact of discontinued factoring, mainly driven by Gas Power collections. Overall, strengthening our operational muscles in billings and collections is translating into DSO improvement, as evidenced by our total DSO, which is down 13 days year over year. Also positively impacting our free cash flow by about $0.5 billion in the quarter was AD&A. Given the year-to-date impact and our fourth quarter estimate aligned with the current airframer aircraft delivery schedule, we now expect positive flow in '21, about $300 million, which is $700 million better than our prior outlook. This year's benefit will reverse in 2022, and together with higher aircraft delivery schedule expectations, will drive an outflow of approximately $1.2 billion next year. In the quarter, discontinued factoring impact was just under $400 million, which was adjusted out of free cash flow. The fourth quarter impact should be under $0.5 billion, bringing our full-year factoring adjustment to approximately $3.5 billion. Leveraging problem solving and value stream mapping, they have reduced average billing cycle time by 30% so far. Year to date, ex discontinuing factoring across all quarters, free cash flow increased $4.8 billion year over year. Taking the strong year-to-date performance, coupled with the headwinds we've described, we're narrowing our full-year free cash flow range to $3.75 billion to $4.75 billion. This strategic transaction not only deepens our focus on our industrial core, but also enables us to accelerate our debt reduction, with approximately $30 billion in consideration. Given our deleveraging progress and cash flow improvement to date, plus our expected actions and better pass-through performance, we now expect a total reduction of approximately $75 billion since the end of 2018. GE will receive a 46% equity stake in one of the world's leading aviation lessors, which we will monetize as the aviation industry continues to recover. On liquidity, we ended the quarter with $25 billion of cash. We continued to see significant improvement in lowering GE's cash needs, currently at $11 billion, down from $13 billion in the quarter, taking this decrease due to reduced factoring and better working capital management. Military orders were also up, reflecting a large Hindustan Aeronautics order for nearly 100 F404 engines along with multiple T700 orders. Shop visit volume was up over 40% year over year and double-digits sequentially, with the overall scope slightly improved. Against that backdrop, orders were up double-digits, both year and versus '19, with strength in Healthcare Systems up 20% year over year, and PDx up high single-digits. You'll recall that last year, the Ford ventilator partnership was about $300 million of Life Care Solutions revenue. Even with the supply chain challenges, we now expect to deliver close to 100 basis point of margin expansion as we proactively manage sourcing and logistics. Based on the latest WoodMac forecast for equipment and repower, the market is now expected to decline from 14 gigawatts of wind installments this year to approximately 10 gigawatts in 2022. For the year, we now expect revenue growth to be roughly flat. Segment margin declined 250 basis points. For the year, we expect about 60 unit orders, up more than five times year over year. Consistent with our strategy, we are on track to achieve about 30% turnkey revenue as a percentage of heavy-duty equipment revenue this year, down from 55% in 2019, a better risk-return equation. At the same time, Gas Power shipped 11 more units year over year. And by year-end, we expect our equipment backlog to be less than $1 billion compared to $3 billion a year ago. At Insurance, we generated $360 million net income year to date, driven by positive investment results and claims still favorable to pre-COVID levels. Based on our year-to-date performance, Capital still expects a loss of approximately $500 million for the year. In discontinued operations, Capital reported a gain of about $600 million, primarily due to the recent increase in AerCap stock price, which is updated quarterly. We are now expecting Corporate costs to be about $1 billion for the year, and this is better than our prior $1.2 billion to $1.3 billion guidance. We just wrapped up our annual strategic reviews with nearly 30 of our business units. We're positioned to truly shape the future of flight with new technology for sustainability and efficiency, such as the recent Catalyst engine launch, the first clean sheet turboprop design entering the business in general aviation market in 50 years. Our free cash flow will continue to grow toward a high single-digit percentage of sales level.

For example, at Aviation's overhaul shops, our teams have used lean to increase turnaround time by nearly 10% and decrease shop inventory levels by 15% since the fourth quarter of 2020. Looking further out to next year, as our businesses continue to strengthen, we expect revenue growth, margin expansion, and higher free cash flow despite the pressures that we're managing through currently. Moving on to Slide 3. We'll use the proceeds to further reduce debt, which we now expect to reach approximately $75 billion since the end of 2018. However, due to our continued improvement across GE, we are raising our '21 outlook for organic margin expansion to 350 basis points or more and our adjusted earnings per share to a range of $1.80 to $2.10. This year's benefit will reverse in 2022, and together with higher aircraft delivery schedule expectations, will drive an outflow of approximately $1.2 billion next year. Taking the strong year-to-date performance, coupled with the headwinds we've described, we're narrowing our full-year free cash flow range to $3.75 billion to $4.75 billion. For the year, we now expect revenue growth to be roughly flat. And by year-end, we expect our equipment backlog to be less than $1 billion compared to $3 billion a year ago. Our free cash flow will continue to grow toward a high single-digit percentage of sales level.

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But as of today at month end, roughly 82% of our total salon portfolio was open for business including both franchise and company-owned salons. Excluding the salons in California that are temporarily closed due to state mandate, 90% of our franchise salons and about 88% of our company-owned salons, representing approximately 90% of the company's portfolio, have reopened. It's important to consider that despite constantly changing external conditions, Regis has been around for almost 100 years now. Given the impact of the pandemic, we now expect to be substantially complete with the refranchising effort on or before the end of fiscal year 2021. In June, we took further action to eliminate administrative costs and personnel, with an expected annualized savings of $6 million. On a full-year basis, our G&A expense was approximately $45.3 million lower than last year primarily due to the transition of company-operated salons to franchise, salon closures and furloughs resulting from the COVID-19 pandemic among other factors. As additional insight, we estimate we lost roughly $105 million of revenue in the fourth quarter due to the COVID pandemic. We are pleased that as of today, approximately 82% of our salons are open across the entire portfolio. Excluding California salons, nearly 90% of our salons are opened. We also reported that our operating loss was $69 million during the quarter. Additionally, the company recognized a $23 million noncash long-lived asset impairment primarily related to its lease assets during the quarter. Fourth-quarter consolidated adjusted EBITDA loss of $34 million was $73 million or 186% unfavorable to the same period last year and was driven primarily by the decrease in the gain associated with the sale of company-owned salons of $27 million and the planned elimination of the EBITDA that had been generated in the prior-year period from the net 1,448 company-owned salons that have been sold and converted to the franchise portfolio over the past 12 months. We executed workforce reductions in January and June resulting in nearly $25 million of annualized savings. On a year-to-date basis, consolidated adjusted EBITDA of $20 million was $103 million or 84% unfavorable versus the same period last year. The change includes a $20 million decrease in the gain excluding noncash goodwill derecognition related to the year-to-date sale and conversion of 1,475 company-owned salons to the franchise portfolio. Excluding the impact of the gain, fourth-quarter year-to-date adjusted EBITDA was a loss of $30 million which was $82 million unfavorable year over year. And like the fourth-quarter results, this unfavorable variance was also largely driven by the elimination of the EBITDA related to the sold and transferred company-owned salons over the past 12 months and the COVID-19 pandemic. Fourth-quarter franchise royalties and fees of $7 million decreased $19 million or 72% versus the same quarter last year. Product sales to franchisees decreased $5 million year over year to $7 million. Franchise same-store sales were unfavorable 20% due to a decline in traffic as customers learned to navigate the pandemic. Fourth-quarter franchise EBITDA of $1 million declined approximately $9 million year over year driven by reduced royalties and product sales due to the government-mandated salon closures in response to the COVID-19 pandemic partially offset by a decline in G&A. Year-to-date franchise adjusted EBITDA of $38 million was flat, decreasing by less than $1 million or 2% year over year. Fourth-quarter revenue decreased $195 million or 93% versus prior year to $15 million. COVID-19 was the primary driver along with the year-over-year decrease of approximately 1,476 company-owned salons over the past 12 months which can be bucketed into three main categories. First, the conversion of 1,475 company-owned salons to our asset-light franchise platform over the course of the past 12 months, of which 112 were sold during the fourth quarter. Second, the closure of approximately 250 company-owned salons over the course of the last 12 months, most of which were underperforming salons that we closed at lease expiration and are not essential to our future strategy. And third, these net company-owned salon reductions were partially offset by 234 salons that were bought back from franchisees over the last year and 15 new company-owned organic salon openings during the last 12 months which we expect to transition to our franchise portfolio in the months ahead. Fourth-quarter company-owned salon segment adjusted EBITDA decreased $44 million year over year to a loss of $22 million. Consistent with the total company consolidated results, the unfavorable year-over-year variance was driven primarily by COVID-19 and the elimination of the adjusted EBITDA that had been generated in the prior-year periods from the company-owned salons that were sold and converted into the franchise platform over the past 12 months. On a year-to-date basis, company-owned salon consolidated adjusted EBITDA loss of $7 million was $95 million unfavorable versus the same period last year. The unfavorable year-over-year variance is driven by the elimination of the adjusted EBITDA related to the sold and transferred salons over the past 12 months and COVID-19. Fourth-quarter adjusted EBITDA loss of $14 million increased $20 million and is driven primarily by the $27 million decline in net gain excluding noncash goodwill derecognition in the prior year from the sale of and conversion of company-owned salons partially offset by the net impact of management initiatives to eliminate non-core non-essential G&A expense. Vendition cash proceeds during the fourth quarter declined approximately $36 million or approximately $33,000 per salon compared to $49,000 per salon in the third quarter of fiscal '20. Our liquidity position as of June 3 was $210 million. This includes $96.5 million of available revolver capacity and $114 million of cash. This compares to a liquidity position of $241.5 million as of March 31, a reduction of $31 million or approximately $10 million per month.

Given the impact of the pandemic, we now expect to be substantially complete with the refranchising effort on or before the end of fiscal year 2021.

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