Prompt:
Human: On a per share basis, second quarter earnings were $4.09 compared to earnings per share of $0.43 last year and earnings per share of $0.55 for the second quarter of 2019.
During the second quarter of 2021, the company recorded adjustments to earnings, including $303 million of noncash gains related to our minority investments, of which $290 million was related to a higher valuation for the company's investment in GOAT and a $39 million charge was due primarily to the impairment review of Footaction.
On a non-GAAP basis, earnings were $2.21 per share, up over 200% compared to earnings per share of $0.71 for the second quarter of last year and compared to earnings per share of $0.66 for the second quarter of 2019.
Andy Gray, Executive Vice President and Chief Commercial Officer, will then provide additional insights into the business drivers in the quarter.
Andrew Page, Executive Vice President and Chief Financial Officer, will then review our second quarter results and provide guidance for the current fiscal year.
We are pleased to report that our momentum continued into the second quarter, leading to excellent top and bottom line results that reflect the health of our category, the deep engagement we have with our customers and the strategic nature of our vendor partnerships.
The broad-based growth was driven by strong performances in women's and kids footwear, coupled with strong demand across apparel and accessories.
In addition, with further gains in our inventory productivity and meaningfully low levels of promotional activity, we were able to deliver significant margin gains in a truly impressive bottom line performance.
For the second quarter, our global fleet was open for approximately 94% of possible operating days with temporary closures in Canada, certain markets in Asia and Germany.
With economies reopening to a greater extent throughout most of the markets in which we operate, we saw a low double-digit lift in traffic compared to fiscal 2020, which demonstrates the ongoing importance of our stores, where our customers enjoy spending time after connecting with us digitally.
Together with the strength of our stores, our digital channels also drove important connections with our customers.
Our digital sales penetration rate was 20.1%, normalizing from the peak levels we saw in 2020 while remaining well above 2019 levels, a trend we expect to continue going forward.
I'm proud of the great progress our teams have made against the ongoing challenges created by the COVID-19 pandemic, delivering great customer experiences despite lean inventory levels and temporary store closures in certain countries.
Turning now to some highlights of our three geographies.
In North America, our Kids Foot Locker and Champs Sports banners led the way with double-digit comp gains on top of last year's double-digit increases.
Our U.S. fleet was open close to 100% of the possible operating days, while our Canadian business was impacted by closures in Ontario, resulting in doors being opened approximately 70% of possible operating days.
We are also making meaningful progress on our North America portfolio and fleet transformation strategy.
As we discussed last quarter, we made the strategic decision to wind down our Footaction banner by the end of fiscal 2022 and focus our resources on our core concepts.
We just completed our first Footaction store conversion, reopening it as a Foot Locker format.
And we have approximately 50 more conversions planned for the back half of the year, along with 130 Footaction store closures.
In EMEA, pent-up demand drove growth as stores reopened across all countries, leading to a double-digit comp gain at Foot Locker Europe.
Altogether, our EMEA fleet was open 87% of possible operating days in the quarter compared to 70% in the second quarter of last year and a meaningful improvement from the 39% in the first quarter of this year.
Our APAC region delivered another solid quarter, also overcoming challenges related to COVID, with the fleet opened approximately 80% of possible operating days compared to over 90% in Q2 last year.
But even with the decline in operating days, we saw a 30% comp increase in our Asia markets and a mid-single-digit gain in the Pacific region.
We continued to make progress in our expansion strategy within Asia in the second quarter.
We launched our local Foot Locker website in South Korea, which will help us connect with our customers and grow our social media following and create a stronger omnichannel business in the market.
We also opened two new stores in South Korea and one store in Singapore.
In addition, we are excited to announce that we have signed a licensing agreement to enter the Indonesia market in partnership with MAP Active, the leading brand commerce and athletic retailer in Southeast Asia.
We expect to launch the local Foot Locker website and open two Foot Locker locations, a power store and a core store this year, with the first store slated to open by early Q4.
Turning to an update on FLX.
We continue to see our membership program gaining traction as enrollment increases.
We finished the second quarter with over 25 million members, up from over 20 million members at the end of the first quarter.
We are excited about the momentum and engagement in the program and the overall benefits it will provide to our business, including higher average spend for members versus nonmembers.
It's worth noting that members spent over 75% more than nonmembers in the second quarter as their average order values were approximately 10% higher than nonmembers and they shopped more frequently at our banners.
We are excited about where FLX is going, and we will continue to create new features and evolve the customer experience for members within existing markets while also working to launch the program in additional countries where we operate.
Overall, these metrics are why we are optimistic about the strength of our portfolio, the power of our assortments and the loyalty of our customers.
Andy will provide more detail around product highlights in the quarter and what we see in the pipeline for back-to-school and more broadly in Q3.
Before he does, I'd like to spend a few minutes discussing our recently announced agreements to acquire WSS and atmos and how we expect the addition of these two businesses to the Foot Locker Inc. family will advance our four strategic imperatives.
You may recall that on numerous occasions, we have articulated our commitment to our four strategic pillars in order to accelerate growth and drive greater value for our stakeholders.
First, elevate the customer experience.
Second, invest for long-term growth.
And fourth, leverage the power of our people.
The acquisitions of WSS and atmos fit our strategy to a tee while also tying back to our purpose, to inspire and empower youth culture and strengthening our connection to the sneaker community.
Each transaction will be accretive, create disciplined growth and enable us to invest in platforms that will maximize value for Foot Locker shareholders.
As we discussed when we announced the two transactions, the addition of WSS and atmos to our brand portfolio will diversify our store footprint and product mix, provide access to complementary and differentiated customer bases and accelerate our growth both in North America and internationally.
Moreover, together, these acquisitions will expand our ability to service the entire retail price value spectrum.
Today, we would like to provide additional detail on how we expect these two terrific businesses to deliver significant financial benefits and drive additional value for shareholders.
The management team has built a strong and scalable business model, led by their off-mall real estate strategy, full family offerings, focus on the Hispanic customer and the commitment to elevating the communities that it serves.
We see a path to approximately $1 billion in sales in the next five years from the $425 million in fiscal 2020, driven by the differentiated WSS consumer concept that we can bring to new U.S. markets and favorable future demographics of the United States marketplace.
In addition to market expansion opportunities, we also have identified both revenue-generating and operating cost synergies.
Our company's expertise in private label apparel design and sourcing, along with the utilization of our team additions speed-to-market apparel facility, present opportunities to generate incremental apparel sales for WSS.
Our company will also deliver incremental supply chain capabilities and capacity, along with shared services operating synergies across the business.
WSS is also well positioned for operating margin enhancements in light of its full family offering that increases basket size, a successful labor model that values outstanding customer service and expertise in choosing high-potential store locations that are well positioned to succeed.
We are excited to add this premium, globally recognized brand into our portfolio.
Over the past two decades, Hommyo-san, the founder of atmos, and his team have built a digitally led and culturally connected premium lifestyle brand that sits at the center of sneaker culture in Asia and beyond.
This acquisition will represent a highly strategic entry point into the important Japanese marketplace with immediate scale as we continue our expansion across Asia Pacific and tap into youth and sneaker culture across the globe.
As many of you know, atmos has a long and storied history of iconic collaborations with a variety of strategic brand partners that create unrivaled hype in our industry.
They are also best-in-class when it comes to retail design and experiential stores located in key markets and shopping districts that serve as inspiring and critical touch points in the omni customer journey.
Atmos generates over 60% of its revenue from their digital channels and has a strong global following across social media platforms.
Both WSS and atmos are high-growth businesses.
We expect that each will generate low double-digit sales growth annually over the next five years, that will, in turn, be accretive to the bottom line.
Andrew will provide some additional color on the potential accretion in his remarks.
We are excited about welcoming both WSS and the atmos to the Foot Locker Inc. family and look forward to integrating these businesses for the benefit of all stakeholders.
One other call out I would like to make is regarding our investment in GOAT.
During the quarter, GOAT closed $195 million Series F round of funding, again confirming the market's confidence in the broader sneaker category.
We continue to be excited about GOAT's success as they expand into new categories such as luxury apparel and accessories.
And we'll continue to look for ways to work together and expand the ecosystem.
In short, the strength of our business has enabled us to invest in profitable growing businesses and deploy our capital effectively to drive shareholder value.
Andrew will drill down into the numbers and discuss capital allocation and our outlook in a moment.
Before he does, here's my perspective as we look to the back half of the year.
We have positive momentum coming off of strong results from the first half.
That said, we're still facing several macro-level issues from the global pandemic to the knock-on effect that it is having in our supply chain.
We are also working closely with our strategic vendor partners to ensure our continued access to product amid the COVID-19 outbreak in Vietnam and other supply chain-related headwinds.
But for those things that we can control, we believe we're in a very good place to deliver positive results in the back half of this year.
Our product pipeline, which continues to be very strong, is resonating well with our consumers.
We anticipate the culture of basketball will continue to be a key revenue driver in the third quarter.
Seasonal offerings will also be very important as consumers look to diversify their footwear purchases.
Lastly, apparel trends continue to be very favorable as we enter back-to-school in the fall season.
And as we consider the opportunities for back-to-school in comparison to the delayed back-to-school season last year, a more normalized cadence this year presents an opportunity to capture more of that demand earlier in the quarter.
That said, we are keeping a close eye on possible disruptions caused by the evolving COVID-19 situation.
We continue to monitor the temporary store closures across the countries in which we operate and will adhere to government mandates.
We look forward to getting our store fleet back to full strength and meeting the pent-up demand we expect to see from our customers as we fully reopen our stores.
Our financial position remains strong.
Our vendor relationships are very strategic in nature.
And we continue to obsess around our customers, whether it's through our digital channels, social media, FLX or an in-store customer experience.
It is their dedication and hard work that made these outstanding results possible and will enable us to continue to drive our business forward and fulfill our purpose, to inspire in a power youth culture.
Our second quarter results continue to showcase that our strategy to strengthen the relationship with our current customers and bring new customers into our business are working.
The three key objectives here are: to maximize our product leadership and diversity of brands, utilize our global scale and investments to elevate our store and digital experiences to get great product into the hands of our consumers, and to continue to double down on our commitment to the communities we serve.
And we saw broad-based growth this quarter by following those objectives.
Our footwear business increased low single digits.
Our apparel and accessories businesses were both up double digits, with both families of business also up double digits compared to 2019.
We saw consumer diversity across departments, and our total men's business was relatively flat and we saw acceleration in women's and kids.
Encouragingly, kids had the largest gain as we continue to recruit and bring in the next generation of sneaker head to start their lifelong journey with us.
The culture of basketball, led by the key Nike icons and new additions from Adidas and New Balance, continues to create excitement and drive momentum.
Here, strength in women's and kids more than offset a mid-single-digit decline in men's that was going up against a double-digit comp of last year.
Additionally, we brought new consumers to our business with an increased focus on the seasonal category, delivering a high double-digit increase with gains in Crocs, UGG and Birkenstock along with an expanded balkanized offering in Vans and Converse, showcasing the variety our consumers want on their feet.
Another area of our business that continues to excite us and gain momentum is apparel, which was up double digits to last year and 2019.
Men's, women's and kids all delivered gains over 20%.
And again, our kids business had the largest increase as we bring in the next generation for apparel as well.
To add distinction to our assortments, we are thrilled to continue working with all of our partners to deliver a strong pipeline of exciting exclusive product concepts that resonate with all of our consumers.
This is a big part of how we bring energy every day.
Recent examples would be our celebration of the 25th anniversary of the Griffin with Nike, our Adidas All Day I dream About Summer concept featuring unique executions of their key iconic silhouettes, and our Crocs and Party Animals concept where we partnered with Ron English to reimagine their icon for summertime.
All of these programs are significant in terms of scale and consumer engagement.
Our powerful consumer concept offense continues into fall, including Puma and LameloBall, New Balance and Louis De Guzman, Vans and Kids of Immigrants and many more.
In addition to our product concept, there's a lot to be excited about for fall.
The culture of basketball momentum continues.
We are continuing our seasonal expansion with an increased focus on boots and fleece to maximize the season ahead.
And we have a very strong pipeline of product and inventory in apparel.
What is new to our business will be the launch of our own brands to maximize the ongoing momentum in the category.
These will feature brands like Locker and Cozy as well as exclusive partnerships with tastemakers and celebrity curators like Downs and Melody Ehsani.
I'm also very pleased to see the results of our commitment to building community and driving meaningful and lasting change for our consumers.
We are building and enabling community in many ways, both through the continued expansion of our community stores and geo offense to ensure we are more deeply rooted in the neighborhoods that we serve, and the continued rollout and expansion of our FLX membership program, where we see significant runway to grow our 25-million member community as well as driving engagement and incremental spend through value-added enhancements and meaningful benefits that excite our consumers and drive leadership in the industry.
Finally, with LEED, we continue to fight racial inequality and injustice.
We addressed our first year in June with a statement on our $200 million commitment.
But to be more specific here, for the quarter, we expanded our associate scholarship program and completed our first summer internship bridge program focused on our Black associates.
We launched the Designing with Sol program with PENSOLE and New Balance, which creates opportunity for underrepresented voices in the footwear industry.
And we continue to bring in Black-owned brands and concepts to give them a platform to connect with our audience.
We have featured 20 brands since announcing this program with 25 more planned for the year.
We're extremely dedicated to this initiative and will continue to drive meaningful and lasting change across our company and within the communities we serve.
As we push our consumer-led offense forward, our strategy will continue to be the combination of product leadership and diversity, enhanced omni experiences and our focus on community and purpose that will guide our actions and make the difference in how we lead this industry.
Let me now pass the call over to Andrew.
Before I begin, I would like to note that in addition to comparing our results for last year, I will also reference comparisons to the second quarter of 2019, where it is helpful.
Now let's discuss our second quarter results.
Starting with the top line.
We delivered a 6.9% comp gain on top of the 18.6% gain in the second quarter of last year.
Along with this strong demand, our focus on more full-price selling, combined with our disciplined expense management, yielded non-GAAP earnings per share of $2.21, an increase of over 200%.
Taking a look at the second quarter.
May's comp gain was up over 50%.
June, which was up against the initial reopening last year, was pressured the most, down high single digits.
While July was down low single digits with momentum improving as we move through the month.
Breaking down our performance by region, North America experienced pockets of growth on top of robust comps from the second quarter of last year.
Kids Foot Locker led with comps over 20%.
Champs Sports followed with a low double-digit comp gain.
Foot Locker posted a mid-single-digit comp gain.
And Footaction, in a wind-down mode, closed the quarter down low double digits.
Foot Locker Canada posted a high single-digit comp decline as we continue to face temporary store closures in key markets.
Eastbay was down over 30% for the quarter.
As a digital-only banner, Eastbay did not benefit from store reopenings and was up against a double-digit comp gain in Q2 of last year.
Foot Locker Asia delivered a roughly 30% comp gain, while Foot Locker Pacific increased in the low single-digit range.
Based on easing COVID restrictions, Foot Locker Europe posted a low 20% comp increase.
Sidestep, which experienced the most store closures during the quarter, decreased low single digits.
By channel, the strength in our comp sales this quarter was driven by our stores, which increased 28.4%.
Let me remind you that our fleet was opened 94% of potential operating days in the quarter versus approximately 70% last year.
Our direct-to-consumer channel returned to a more normalized level, accounting for 20.1% of total sales for the quarter, down from 33.2% last year but up from 14.3% in the second quarter of 2019.
Reflecting on the more limited promotional environment, average selling prices were up mid-single digits in the quarter while units were up low single digits.
In addition, the higher sales penetration in our stores led to more full-price selling.
Moving down the income statement.
Gross margin was 35.1% compared to 25.9% last year.
When compared to a more normal Q2 of 2019, gross margin improved an impressive 500 basis points.
The trends we experienced in the first quarter continued in the second quarter with the combination of robust demand and fresher name inventory driving meaningfully lower levels of promotional activity.
Our merchandise margin rate improved 870 basis points over last year and 170 basis points over 2019, driven primarily by the meaningful reduction in markdown.
Looking ahead, we expect the promotional environment to remain favorable through most of this year but to a lesser extent than what we experienced in the first half.
As a percent of sales, our occupancy and bias compensation costs leveraged 50 basis points over Q2 of 2020 and 330 basis points over Q2 2019.
This is inclusive of approximately $6 million of COVID-related rent abatements in the quarter, which was unchanged compared to Q2 of last year.
Our SG&A expense rate came in at 19.8% of sales in the quarter as we returned to more normalized store operating levels.
This yielded 120 basis points of deleverage over last year and 240 basis points of leverage compared to 2019.
In addition to careful expense control, we received approximately $4 million in government subsidies in the quarter, which is down from the $17 million we received in Q2 of 2020.
We also incurred $4 million of lower PPE expense.
And bonus expense came in 40 basis points lower.
For the quarter, depreciation expense was $48 million, up from $44 million last year, while interest expense was $2 million, flat to last year.
Our non-GAAP tax rate came in at 27.4%, below last year's rate of 30.7%.
The improved rate in the current quarter reflects the lower proportion of nondeductible items on the overall rate.
Turning to our liquidity position.
We ended the quarter with $1.8 billion of cash, an increase of $472 million compared to Q2 last year, primarily driven by our higher inventory turns.
We currently have no outstanding borrowings on our $600 million credit facility.
At the end of Q2, inventory was down 9.5% to last year versus total sales increase of 9.5% as strong demand outstripped the increase in receipts during the quarter.
On a constant currency basis, inventory was down 10.4%, while sales increased 7.3%.
We invested approximately $36 million into our business in the form of capital expenditures during the quarter.
This funded the opening of 16 new stores as well as the remodeling or relocating of 23 stores.
We also closed 57 stores in the quarter, primarily in the U.S., leaving us with 2,911 company-owned stores at the end of Q2.
For the full year, we now expect to open approximately 120 stores, remodel or relocate 165 and close 345.
These amounts reflect about 190 Footaction stores we plan to close or reposition in 2021.
Looking forward, we now expect to invest approximately $260 million in capital expenditures this year, down slightly from our prior guidance of $275 million.
However, this number and the fleet update do not reflect any impact related to our announced acquisitions of WSS and atmos.
As Dick mentioned, we are excited about the strategic potential that both assets bring to the Foot Locker Inc. family.
They will provide us with the opportunity to expand into new markets, customer segments and price points as well as deepen our relationships with existing vendor partners, create new relationships with new vendors and diversify our retail footprint.
In addition, while both transactions are about growth, we also see opportunity for cost synergies with the WSS transaction.
More specifically, in 2022, we expect that we will begin to generate approximately $10 million in annualized cost synergies by leveraging our supply chain and operating capabilities.
Based on the expected growth trajectory for both WSS and atmos, we expect each of these businesses to achieve low double digits to mid-teens EBITDA margins over the next five years.
As we previously communicated, we anticipate both WSS and atmos will be accretive to Foot Locker's earnings for fiscal 2021.
We anticipate that accretion on an annualized basis will be in the range of $0.44 to $0.48 in 2022.
In light of these strategic investments, we want to use this opportunity to reiterate our approach to capital allocation.
While we made adjustments to our strategy over the past year as we tackle the effects of the pandemic on our business, we have historically maintained and communicated our balanced approach that includes: investing in our business to drive growth while also returning value to shareholders through dividends and opportunistic share repurchases.
What you have seen so far this year is a reflection of exactly that approach, with a combination of thoughtful organic investments in our business and highly targeted M&A activity.
At the same time, we continue to focus on delivering meaningful returns of cash to our shareholders through our dividend and share repurchase program.
We believe the 50% increase to our quarterly dividend, which we announced earlier this week, signals our Board's confidence in the business and our financial strength.
To-date, in fiscal 2021, we have paid out $42 million in dividends and repurchased approximately 745,000 shares for $41 million.
Going forward, we and the Board expect to continue with this focused capital allocation strategy designed to maximize shareholder value.
Finally, we are providing guidance for the current fiscal year.
As a reminder, our general practice is to only provide annual comp sales and earnings per share outlook and not quarterly guidance.
Also, please note that this color excludes any impact of the acquisition as they have not yet closed; and that we are still operating in an uncertain environment and seeing shutdowns in certain markets outside the U.S., along with changes closer to home due to the COVID-19 variance.
For fiscal 2021, we remain optimistic and expect to deliver a low to mid-teen increase in comp sales.
From a cadence point of view, keep in mind that Q3 is up against a strong back-to-school period, and some of the enhanced government assistance programs are scheduled to end.
We are expecting the gross margin rate to be up 490 to 510 basis points for the full year versus 2020, mostly driven by a more rational promotional environment.
Our SG&A expense rate is expected to leverage between 40 and 60 basis points year-over-year.
In terms of depreciation and amortization expense, we expect it to be approximately $185 million to $190 million.
Lastly, we expect our full year effective tax rate to be in the range of 28% to 28.5%.
We expect our non-GAAP earnings range to be approximately $7 to $7.15 per share.
This guidance reflects the strong performance in the first half of the year and our optimism around the back half of 2021 and while recognizing that we are going up against more normalized store operating days versus last year.
Our financial position is strong, and it allows us to remain flexible as we seek to deliver against our strategic plans and drive shareholder value.
 Assistant:

Chosen response:
compname reports q2 earnings per share of $4.09.
q2 non-gaap earnings per share $2.21.
q2 earnings per share $4.09.
q2 same store sales rose 6.9 percent.
cautiously optimistic about outlook for back-half of 2021.
continue to keep a close eye on business, including temporary store closures and supply chain challenges.
at july 31, 2021, co's merchandise inventories were $1,081 million, 9.5% lower than at end of q2 last year.


Prompt:
Human: Mark will review our second quarter results, provide our outlook for the remainder of 2021 and discuss our diamides business.
Andrew will provide an overview of select financial items.
Information presented represents our best judgment based on today's understanding.
Actual results may vary based upon these risks and uncertainties.
Today's discussion and the supporting materials will include references to adjusted EPS, adjusted EBITDA, adjusted cash from operations, free cash flow and organic revenue growth, all of which are non-GAAP financial measures.
Please note that as used in today's discussion, earnings means adjusted earnings and EBITDA means adjusted EBITDA.
A reconciliation and definition of these terms as well as other non-GAAP financial terms to which we may refer during today's conference call are provided on our website.
Our second quarter results, revenue up 8%, EBITDA up 2% and earnings per share up 5% year-over-year were slightly ahead of our guidance.
These results were fundamentally driven by volume, reflecting robust demand for FMC products around the world.
Innovation continues to be a catalyst for growth.
New products introduced in the last 12 months contributed $30 million in sales growth in the quarter and our plant health products, including biologicals, posted Q2 sales growth in the high teens.
We continue to expect a very strong second half of 2021, driven by robust volume growth.
We have lowered our full year earnings guidance due to the continued acceleration of raw material, packaging and logistics costs.
We will go into this in more details later.
I'd like to take a moment to provide a COVID-19 update on our business.
All our manufacturing facilities and distribution warehouses remain operational and properly staffed.
Our research laboratories and greenhouses also have continued to operate throughout the pandemic.
We are resuming in-office operations work permitted by local authorities.
And in June, we introduced flexible work arrangements to facilitate the return of all our staff to our headquarters in Philadelphia as well as some other locations in adherence with local guidelines.
Turning to our Q2 results on slide three.
We reported $1.2 billion in second quarter revenue, which reflects an 8% increase on a reported basis and a 4% increase organically.
Asia and Latin America posted the largest growth of 20% and 15%, respectively.
Our fungicides grew over 50% in the quarter, driven by the Xyway launch in the U.S., and fungicides represented 8% of total sales in Q2 versus 5% of our sales in the prior year period.
Adjusted EBITDA was $347 million, an increase of 2% compared to the prior year period and $2 million above the midpoint of our guidance range.
EBITDA margins were 28%, a decrease of 150 basis points compared to the prior year, reflecting the impact of continued and accelerating cost headwinds.
Adjusted earnings were $1.81 per diluted share in the quarter, an increase of 5% versus Q2 2020 and also $0.03 above the midpoint of our guidance range.
The year-over-year increase was primarily driven by the increases in EBITDA and lower interest expense.
Moving now to slide four.
Despite the unfavorable weather conditions in several regions, Q2 revenue increased by 8% versus the prior year, driven by a 4% volume increase and a 4% tailwind from foreign currencies.
Pricing was essentially flat year-over-year.
Sales in Asia increased 20% year-over-year and 13% organically, driven by double-digit growth in India, Australia, Indonesia and Pakistan.
Insecticides contributed the greatest growth, including Altacor for cotton, and herbicide sales were also very strong, driven by share gains in India for soybean and sugarcane applications as well as robust sales in Australia.
In Latin America, sales increased 15% year-over-year and 12% organically.
Mexico and Colombia each posted double-digit growth, driven by strength of our products on specialty crops.
We also had a shift of diamide partner sales to Latin America from North America, similar to what occurred in Q1, which boosted the year-over-year growth rate.
EMEA sales increased 3% year-over-year, but declined 3% organically as FX was a significant tailwind in the period.
Diamides grew well, and we saw strong sales of herbicides for cereals and sugar beets.
However, this wasn't enough to offset the late start of the spring, which resulted in lost applications for the FMC portfolio that will not be regained during the season.
In North America, sales decreased 7% year-over-year and 8% organically.
Similar to Q1, the year-over-year sales decline in Q2 was due to the shift of diamide partner sales from North America to other regions.
Excluding revenue from our global diamide partnerships, our U.S. and Canada crop business grew greater than 20%, driven by an approximate $25 million contribution from two new products, Xyway fungicide and Vantacor insect control for specialty crops.
Turning now to the second quarter EBITDA bridge on slide five.
EBITDA in the quarter was up 2% year-over-year due to the volume contribution of $42 million, largely offset by a $35 million cost headwind.
The cost headwind continues to be driven by increases in raw material, packaging and logistic costs and the very modest reversal of some of the temporary cost savings from 2020.
Pricing was essentially flat versus prior year.
Turning to our view of the overall market conditions for 2021.
We now expect the global crop protection market will be up mid-single digits on a U.S. dollar basis, which is slightly higher than our prior forecast and the most bullish we've been on the overall market for the past few years.
The reason for the change is our view that the Latin American market will now grow in the high single digits versus low single digits before.
Basic crop fundamentals remain strong, especially in that region.
We continue to anticipate mid-single-digit growth in the EMEA market, low to mid-single-digit growth in the Asian market and low single-digit growth in the North American market.
Turning to slide six and the review of FMC's full year 2021 and Q3, Q4 earnings outlook.
FMC full year 2021 earnings are now expected to be in the range of $6.54 to $6.94 per diluted share, a year-over-year increase of 9% at the midpoint.
This is down $0.31 at the midpoint versus our prior forecast.
Consistent with past practice, we do not factor in any benefit from future potential share repurchases in our earnings per share guidance.
Our 2021 revenue forecast remains in the range of $4.9 billion to $5.1 billion, an increase of 8% at the midpoint versus 2020.
EBITDA is now expected to be in the range of $1.29 billion to $1.35 billion, representing a 6% year-over-year growth at the midpoint.
This is a $50 million reduction at the midpoint compared to our prior forecast due to continued acceleration costs for raw materials, packaging and logistics.
This includes spending more to procure certain raw materials and intermediates from alternate sources where there is limited availability at our preferred suppliers.
Despite dry and cold conditions in certain parts of Brazil during Q2, we are bullish for the second half in Latin America, especially for soybeans and cotton.
In Brazil, our channel inventories are at more normal levels for this point in the season following the actions we took in Q1 this year.
And we already have received nearly 70% of the orders needed to deliver our full year forecast in Brazil.
Guidance for Q3 implies year-over-year sales growth of 8% at the midpoint on a reported basis and 7% organically.
We are forecasting EBITDA growth of 5% at the midpoint versus Q3 2020, and earnings per share is forecasted to be up 7% year-over-year.
Guidance for Q4 implies year-over-year sales growth of 20% at the midpoint on a reported basis with no FX impact anticipated.
We are forecasting EBITDA growth of 35% at the midpoint versus Q4 2020, and earnings per share is forecasted to be up 46% year-over-year.
It is worth noting that about half of this growth is going to be driven by the return of business we missed in Q4 2020 due to supply chain issues in North America and weather impact in Latin America.
Turning to slide seven and full year EBITDA and revenue drivers.
Revenue is expected to benefit from 6% volume growth, a 1% contribution from higher prices and a 1% benefit from FX.
We continue to expect broad growth across all regions except EMEA and a very strong second half of 2021.
We have raised our forecast for 2021 revenue contribution from products launched in the last 12 months to $130 million from $100 million before.
This includes launches of Overwatch herbicide, Xyway fungicide as well as Vantacor and Elevest insect controls.
Our EBITDA bridge shows an increase of about $50 million in the expected impact from costs versus our May forecast.
We continue our cost control actions to limit the net cost headwind.
As we stated throughout the year, the R&D spending in our forecast is what is needed to keep our projects on a critical path to commercialization.
But this year-over-year increase will be closer to $20 million rather than the $30 million to $40 million we had previously indicated as we limit overall cost increases.
Relative to our prior guidance bridge in May, we raised the anticipated volume contribution and lowered our benefit from pricing to reflect our decision to take volume with our high-margin portfolio.
Moving to slide eight, where you see the Q3 and Q4 drivers.
On the revenue line for the third quarter, we are expecting a 6% contribution from volume, 1% contribution from price and 1% benefit from FX.
We had a very strong revenue outlook for Q4, driven by five main elements.
First, we forecast a strong recovery for our U.S. and Brazil businesses following the weak Q4 2020 in those countries.
This contributes about half of the total growth in the quarter.
Second, new products will be a major factor.
Xyway fungicide, new diamide formulations Elevest and Vantacor, Fluindapyr fungicide for noncrop applications in the U.S., Overwatch herbicide in Australia and Authority NXT herbicide in India.
Third, strong crop fundamentals.
We expect a strong Q4 in North America and Latin America, driven by good fundamentals for a variety of crops.
In Brazil, this includes cotton, as growers have indicated a 15% increase in hectares for the upcoming season.
Fourth, improved market access and expansion into new geographies and crops.
This is having a significant impact in India, Indonesia, the Philippines, Vietnam, Eastern Europe and Russia.
And finally, fifth, price increases will help offset the FX headwind from last year and the higher costs from raw materials this year.
We are already holding orders for Brazil and U.S. that are at higher year-over-year prices.
Much of our forecasted Q4 EBITDA growth will come directly from the volume and pricing growth I just described.
Although we are seeing a large increase in cost in Q4 on a year-over-year basis, we are taking actions to reduce SG&A and R&D to offset a portion of the raw material and supply chain cost headwinds we are facing.
FX was a stronger-than-expected tailwind to revenue growth in the quarter at 4% versus our expectations of a 1% tailwind as the U.S. dollar weakened against all major currencies relevant to FMC.
Interest expense for the quarter was $32.6 million, down $8.1 million from the prior year period driven by the benefit of lower LIBOR rates and lower foreign debt balances.
With continued low interest rates, we now expect interest expense to be between $130 million and $135 million for the full year.
Our effective tax rate on adjusted earnings for the second quarter was 13.5% as anticipated and in line with our continued expectation for the full year tax rate.
Moving next to the balance sheet and liquidity.
Gross debt at quarter end was $3.8 billion, up roughly $200 million from the prior quarter.
Gross debt to trailing 12-month EBITDA was 3.2 times at the end of the second quarter, while net debt to EBITDA was 2.6 times.
The difference between gross debt and net debt metric is much larger than usual this quarter as we had significant cash that we were not able to return to the United States prior to quarter end.
We are exploring repatriation alternatives for this cash in the third quarter.
Both levered metrics were above our targeted full year average leverage levels due to seasonality of working capital and will improve through the remainder of the year.
Moving on to slide nine and cash flow and cash deployment.
Free cash flow for the second quarter was $204 million, essentially flat to the prior year period.
Adjusted cash from operations was lower than the prior year period, in large part due to timing changes of certain tax payments.
Inventory was higher, reflecting the accelerating cost of raw materials as well as increased inventory levels, particularly of diamide, as we prepare for a very strong second half.
However, the growth in inventory was offset by increased payables.
Capital additions were somewhat higher as we continue to ramp up spending following deferral of projects last year due to COVID.
Legacy and transformation spending was down substantially with the benefit of the completion of our SAP program.
With the reduction in our outlook for full year EBITDA, we are similarly adjusting downward our expectations for free cash flow to a range of $480 million to $570 million, with the vast majority of this cash flow coming in the fourth quarter.
Our outlook for adjusted cash from operations has weakened further the EBITDA, driven by somewhat higher-than-expected working capital due to shifts in timing of sales to the latter part of the second half of the year, which will shift some collections into the following year, as well as higher inventory driven partially by elevated raw material costs.
Our outlook for capital additions as well as for legacy and transformation have improved slightly.
We returned $87 million to shareholders in the quarter via $62 million in dividends and $25 million of share repurchases, buying back 212,000 shares in the quarter at an average price of $118.10 per share.
Year-to-date, we've returned $224 million to shareholders through dividends and repurchases.
For the full year, we continue to anticipate paying dividends of roughly $250 million, and now expect to repurchase a total of $350 million to $450 million of FMC shares this year, with the outlook for repurchases down slightly, reflecting the lower EBITDA guidance.
And with that, I'll hand the call back to Mark.
Today, we'll provide an update on the progress of our diamide growth strategy.
Since we launched FMC as a pure-play agricultural science company, diamides have been a core part of our business.
Rynaxypyr and Cyazypyr have grown to be almost 40% of FMC sales today.
Turning to slide 11 and some basic data on the insecticides market, which has grown by 83% from 2007 to 2019 and is approximately $17 billion in value today.
Following the broad crop protection market drop in 2015, insecticides have grown 2% per year.
We expect this to accelerate in the next decade to about 3.3% compound annual growth rate, as higher-value technologies take more share from older insecticides that are being phased out by regulators.
We believe by 2030, the insecticide market will expand by about $7 billion versus 2019 to $24 billion in total.
Moving to slide 12.
We show the year-by-year revenue of the major insecticide active ingredient classes from 2014 through 2019, as reported by AgbioInvestor, and the respective share gains and losses over the period.
FMC diamides Rynaxypyr and Cyazypyr make up well over 80% of the entire diamides class, which includes a few other smaller active ingredients.
Our diamides have grown to be about 10% to 11% of the total insecticide market, and the total diamides class has gained 2% share from 2017 to 2019 to reach 13% of the total insecticide market.
Conversely, organophosphates and neonicotinoids have lost overall share.
Turning to slide 13.
We show the geographic breakdown of our $1.8 billion in diamide sales in 2020.
This is all Rynaxypyr and Cyazypyr sales and includes FMC sales of branded products and sales to our partners.
Asia makes up nearly 40% of our diamides business today with North America a little over 1/4 of the sales and EMEA and Latin America between 15% and 20% each.
FMC diamides have grown well above the market in all regions since we acquired them in 2017.
On the right is the crop breakdown for our diamides.
It should be no surprise that fruit and vegetables and rice make up about 50% of our current revenues.
This is why the diamides are so strong in Asia, since that market is about 30% rice and 30% fruit and vegetables.
Turning to slide 14 and our diamides commercial strategy, which we've discussed many times over the past two years.
We have long-term supply agreements with five key multinational companies, including the UPL deal we announced in March of this year.
We also have 50 local agreements in various countries, and we have another 15 potential agreements currently under discussion.
These agreements are helping significantly expand the market for our diamides.
Our partners give us access to customers we do not currently serve.
They also have access to certain active ingredients that can be formulated with our diamide to expand the market beyond what FMC has access to.
The $1.8 billion diamide revenue in 2020 was roughly 60% through our own commercial activities, which we label as FMC branded on these charts and 40% through our global and local partners.
Since we acquired these products, our diamide growth has been evenly split between FMC-branded business and sales to our partners, which demonstrates how complementary these two routes to market are.
We've been very deliberate in driving our growth through our partnership model.
The success of this model is shown by the fact that the company EBITDA margins expanded 100 basis points from 2018 to 2020, even as these partners were growing significantly, confirming this strategy is not margin dilutive.
The other aspect to having sales to partners represent $700 million of our annual revenue can add more volatility in timing of demand.
As such, revenues can be impacted by shifts in partner demand across the geographies and in time periods.
We have structured the contracts with partners to have extended duration.
Many of the agreements go through the end of this decade and some go beyond that time frame.
Moving to slide 15.
There are several highlights of how we have grown our FMC-branded portion of our diamide sales.
New formulations, new registrations, label extensions and improved market access will drive growth not only for the diamides but for all FMC active ingredients.
Earlier this year, we launched the novel patent-pending Vantacor formulation in the U.S., which has already exceeded our original forecast.
Vantacor provides a much higher concentration than prior Rynaxypyr formulation, offering improved mixing, less packaging and an improved sustainability profile.
We see compelling opportunities in several crops and plan to launch Vantacor around the world, including Australia, where we have just received regulatory approval.
We will continue to introduce other new mixtures and innovative formulations in all regions with 11 more launches expected by 2026.
We are also developing new products' offerings for our patented PrecisionPac and 3RIVE 3D systems, which are expected to launch during the next five years.
Furthermore, we continue to expand our precision agricultural platform with additional services provided to growers and dealers through Arc Farm Intelligence.
Moving to slide 16, where we provide an update on our registrations and label extension strategy for our FMC-branded diamides.
A product registration from regulators is required in every country where we wish to sell, and each specific crop to be treated must be further approved by the regulators in that country.
Every product use approved by regulators equals a new slice of addressable market.
Today, we have approximately 2,700 approved uses across all products based on Rynaxypyr, and 1,100 across all products based on Cyazypyr.
We currently have 600 regulatory submissions under review and another 230 that we plan to submit to regulators from 2021 to 2025.
We anticipate nearly 600 of these will achieve regulatory approval in the next five years.
Moving to slide 17 and the diamide patent state.
Rynaxypyr is covered by 21 patent families with a total of 639 granted and pending patents.
Together with Cyazypyr active related patents, we have over 30 patent families and close to 1,000 granted and pending patents filed in 76 countries worldwide.
Rynaxypyr and Cyazypyr are complex molecules to produce.
We have patented many of these steps and several of these intermediate processes patents run well past the expiration of the active ingredient composition of matter patents.
The fastest route to market for a competitor to enter the market for generic Rynaxypyr or Cyazypyr is to register their product by relying on FMC's product data.
To do so, they will also be required to demonstrate that their product has the same profile as FMC's Rynaxypyr or Cyazypyr.
To meet these stringent regulatory requirements for such difficult-to-manufacture molecules, the AIs will have to be made the same way we are making it, which is protected by our FMC process patents.
Our patent portfolio includes extensive coverage of key intermediate chemicals, commercial and alternative manufacturing processes, mixtures and formulations.
slides 18 and 19 show the patent time lines for the top five markets.
Taking into account our patents and regulatory requirements, we do not expect to see sales by a legitimate generic competitor that uses the approved manufacturing process, which would rely on our Rynaxypyr product data before 2026 in Europe, Brazil, India or in China, and 2027 for the U.S. Using that same approach for Cyazypyr on slide 19, we do not expect to see sales by legitimate generic competitors until 2026 for Brazil, China and India, 2027 for Europe, and 2028 for the U.S.
It is important to note that process and intermediate patents are critical as it is extremely difficult to produce these compounds without these intermediates.
Moving to slide 20.
We are confident that our patent portfolio is impossible.
This is evident in a recent favorable injunction, restraining NATCO in India from making or selling any product containing Rynaxypyr.
Notably, the court also ordered NATCO not to use our patented processes to make Rynaxypyr.
We anticipate that this is the first of many successful enforcements of our diamide process patents.
To date, we have enforced our patents and obtained preliminary injunctions or settlements against six infringers in India, and we have commenced litigation against four infringers in China.
Beyond patent enforcement, we've also had a variety of other successful court decisions that support our strategy.
For example, we have obtained an injunction against the Brazilian regulators to respect our Rynaxypyr data exclusivity, which will postpone action on all generic Rynaxypyr applications filed while our data exclusivity was still in force.
This effectively delays their registration approval by years.
In addition to our legal strategy, we have also adopted a comprehensive regulatory advocacy strategy that includes notifying regulators about companies that do not have permission to produce.
As a result of these efforts, multiple countries have decided not to accept applications for registration of Rynaxypyr products prior to the active ingredients' patent expiration and others have decided to require additional data and proof of legitimate manufacturing rights in the source country as part of the application process.
So to recap on the diamides.
First, the insecticide market continues to grow, and our diamides will continue to take share.
Second, our partner strategy is accelerating the growth of diamides and smoothing the transition to a post-patent business later this decade.
Third, our patent state is strong and will remain in place for a long time.
Fourth, we are successfully defending our patents and we'll continue to enforce our IP.
And fifth, diamides will continue to be a meaningful contributor to FMC's growth throughout this decade and beyond.
Our mid- to long-term growth story is firmly rooted in the strength of our current portfolio, the diamide expansion we just outlined and the significant growth we anticipate from our new product pipeline over the next decade.
This is a bold step for our company and reflects our deep commitment to sustainability.
 Assistant:

Chosen response:
fmc corp sees q3 revenue up 8%.
sees fy adjusted earnings per share $6.54 to $6.94.
sees q3 revenue up 8 percent.
sees q4 revenue up 20 percent.
sees fy revenue $4.9 billion to $5.1 billion.
qtrly revenue of $1.2 billion, an increase of 8 percent versus q2 2020.
qtrly consolidated adjusted earnings per diluted share of $1.81.


Prompt:
Human: Non-GAAP financial measures should be viewed in addition to, and not as an alternative for our reported results prepared in accordance with GAAP.
Gary will discuss asset quality and Vince will review the financials.
Today, I'll touch on our 2020 financial highlights, review last year's accomplishments, and wrap up with a discussion about our strategic objectives.
First, I'd like to highlight some key metrics from our 2020 financial results.
Despite substantial challenges resulting from the pandemic, management took significant actions to protect our employees and preserve shareholder value, implementing measures to improve efficiency and increase profitability as we navigated the pandemic.
Looking at the fourth quarter, FNB reported operating earnings per share of $0.28, and operating return on tangible common equity increased to 15% building on the upper quartile returns relative to peers through the first nine months of 2020.
Turning to the income statement for fiscal year 2020, FNB reported record total revenue of $1.2 billion, operating net income of $314 million and operating earnings per share of $0.96, while building significant credit reserves to address economic risks associated with the pandemic.
These profitability levels resulted in strong internal capital generation driving our tangible common equity and the CET1 ratio to the highest levels in decades, and increasing tangible book value per share by 5% to $7.88.
Because of our performance in the prudent risk management culture, FNB continue to pay an attractive dividend.
Our portfolios continue to expand with full year average loan and deposit growth of 11% and 14%, respectively.
This growth was due to the resiliency of our bankers and the success of the Paycheck Protection Program with balanced contributions across our legacy footprint and added growth in our Southeastern markets.
Our leadership team prioritized a number of financial objectives during fiscal year 2020 designed to drive long-term results.
Reflecting on the 2020 operational initiatives we laid out in last year's letter to our shareholders, we made significant progress toward this objective in spite of a difficult operating environment.
We set out to deliver peer-leading returns on tangible common equity and drive internal capital generation and growth in tangible book value per share.
Our 2020 return on average tangible common equity of 13% and 5% growth in tangible book value continue to track above others in the industry.
Sustaining this trajectory through execution of this strategy should increase our relative valuation over time compared to peers.
In tandem with delivering this financial performance in a challenging environment, we set out to protect our attractive dividend, while optimizing capital deployment.
For the full year, we paid out $165 million in cash dividends and repurchased nearly $40 million of stock under our current stock repurchase program, returning over $200 million directly to shareholders.
From a capital planning perspective, we've now surpassed our previously stated target and completed the adoption of CECL, both leading to enhanced flexibility to optimize capital deployment in this environment.
During the second half of the year, we took significant steps to enhance future risk-adjusted returns through prudent balance sheet actions, notably the auto loan sale in November, reducing exposure to COVID-19-sensitive industries and the prepayment of higher cost liabilities.
These actions reduced overall credit risk, reduced future interest expense and provides us with more liquidity moving forward.
In the fourth quarter, we resumed the inaugural FNB share repurchase program after activity was halted in the first quarter due to uncertainty related to the pandemic.
When considering the total capital consumed by the dividend and share buyback combined, we are pleased to report an increase in year-end capital levels.
Approximately 25% of the total shares repurchased were below tangible book value, resulting in accretion to that metric.
The overarching goal of our organization is to grow revenue by prudently increasing our loan and deposit portfolios, all while maintaining superior credit quality and FNBs risk management culture through this cycle.
During a difficult operating environment, many of our teams exceeded loan and deposit origination targets, while improving our funding mix through a focus on bringing in low-cost deposits.
As a proof point, loans continue to grow even when excluding the impact of PPP and the auto loan portfolio sale.
On the deposit side, in addition to an improved deposit mix, non-interest bearing deposits surpassed $9 billion to end the year.
As a percentage of non-interest bearing deposits, our percentage of non-interest bearing deposits increased to 31%, up meaningfully from 24% five years ago.
FNB is in a very strong liquidity position with a loan deposit ratio of 87% to fund future loan growth with strengthened capital and enhanced liquidity.
Diversification and growth in our fee-based businesses, namely capital markets, mortgage banking and wealth management, contributed significantly to our record total non-interest income levels.
Our fee-based businesses had an outstanding year with many groups setting all-time records for revenue.
In 2020, capital markets, mortgage banking and wealth management achieved revenues of $39 million, $50 million and $49 million, respectively.
The strong performance was driven by increased contributions due to our geographic expansion strategy and providing value-added solutions to borrowers.
We continue to look for ways to diversify our fee income streams by executing on strategic initiatives such as growing the mezzanine finance group and enhancing FNB's debt capital markets capabilities.
Total operating non-interest income exceeded $300 million in 2020.
Through our continuous investment in both our digital and physical delivery channels, we aspire to provide our customers with intuitive and efficient solutions to meet their banking needs.
On the digital front, adoption rates from mobile banking users have increased exponentially in 2020, attributable to 18% growth in new users added to the platform in the last nine months.
Looking back over the last five years, we have now consolidated 111 branches, opened 12 de novo branches in attractive markets and expanded our ATM capabilities to exceed 800 locations.
These actions enabled FNB to optimize our overall footprint with limited disruption for our customers.
We have diligently invested in technology and risk management infrastructure by upgrading platforms in the retail bank and improving the customer experience.
We continue to evaluate our distribution network regarding consolidation efforts as we announced '21 consolidation to take effect in 2021.
Building on FNB strategy to grow its market presence, particularly in metropolitan Baltimore and Washington DC, we entered an agreement with Royal Farms, a regional convenience store operator, that enables us to connect cash distribution services with a robust, online and mobile banking offering, providing convenient access to essential banking products and services throughout a broader geographic region with the deployment of more than 220 ATM locations in the Mid-Atlantic region.
In addition to withdrawals, transfers and balance enquiries, several of the Royal Farms ATM will also feature check and cash depositing capabilities to provide customers with even greater flexibility and increased access to broader product offerings.
As evidence of successful execution of our growth strategy, according to the most recent FDIC data, we experienced deposit growth in 50 to 53 MSAs across our footprint.
FNB achieved top-5 share position in nearly half of those MSAs, further illustrating our ability to compete effectively in our market against a broad spectrum of competitors.
Additionally, we strive to continue to manage cost and improve efficiency.
This is evident by FNB achieving our stated 2020 cost savings floor of $20 million.
In addition to achieving the 2020 target, FNB also achieved its roughly $20 million cost target in 2019.
When including a plan to reduce an additional $21 million in expenses during full year 2021, in total, this amounts to more than $60 million of expense reduction over the three-year period.
Because of our proactive expense management initiative, our efficiency ratio remained at a good level at 56% despite pressures on net interest income in a challenging rate environment and continued capital investment in technology.
Our strategy is proven through varying cycles as evidenced by the solid performance and continued focus on improvement in many key asset quality metrics.
To expand on this topic, I'll ask Gary to comment on credit quality.
Our credit portfolio continued to perform in a satisfactory manner in the fourth quarter and we are very pleased with the position of our portfolio as we move into 2021.
Our key credit metrics showed improvement across a number of categories after we took steps during the quarter to proactively reduce exposure to borrowers most impacted in this COVID-sensitive environment, which drove a reduction in the level of delinquency and NPL.
Specifically we were successful in further reducing our limited exposure to the hotel and lodging industry by nearly 20%, which improved our position in this hardest-hit asset class that now stands at only 1.3% of the loan portfolio, exclusive of PPP loan balances.
Let's now review some of the highlights covering both the fourth quarter and full year results, followed by some commentary around COVID-sensitive portfolios and deferrals.
Turning first to credit quality, the level of delinquency came in at a very good level of 1.02% representing a 5 basis point improvement over the prior quarter.
And when excluding PPP loan volume, delinquency would have ended December at 1.11%.
The level of NPLs and OREO totaled 70 basis points, an improvement of 6 bps linked-quarter, while the non-GAAP level excluding PPP loans stood at 77 basis points.
We saw very positive OREO sales activity this quarter, which contributed to the $10 million linked-quarter reduction for an ending OREO balance of $8 million, a historically low level.
Additionally, we were successful in moving several credits off the books during Q4 to proactively de-risk the balance sheet, thereby further reducing NPL levels.
Net charge-offs for the quarter were $26.4 million or 41 basis points annualized, which reflects the actions taken to strategically move these select COVID-sensitive credits off the books, utilizing previously established reserves.
Our GAAP net charge-offs for the full year came in at a very solid 24 basis points.
Provision expense totaled $17 million for the quarter, ending December with the reserve position at 1.43%.
Excluding PPP loan volume, the non-GAAP ACL stands at 1.56% or a 5 basis point linked-quarter decrease, again due to the reductions in exposure across these COVID impacted sectors.
When including the remaining acquired unamortized discount, our total coverage stands at 1.8%.
The NPL reserve coverage position also remains favorable at 213%, reflecting a slight improvement linked-quarter.
I'd now like to provide you with an update on our loan deferral levels and COVID-sensitive industry exposure.
As it relates to our borrowers requesting payment deferral, 1.7% of the loan portfolio, excluding PPP was under a COVID-related deferral plan at December 31.
As I mentioned earlier, we made significant progress during the quarter to further reduce the limited exposure we have to higher risk segments, including travel and leisure, food services and energy.
On a linked-quarter basis, exposure to higher risk segments declined by nearly $90 million to stand at only 3.1% of the total loan portfolio.
The primary driver of the decrease was led by a $65 million reduction in hotel exposure, which as noted earlier in my remarks, stands at only 1.3% of our total loan portfolio.
Loan deferrals in the three higher risk segments ended the year at only 7%, down from the prior deferral level of 29% at the end of the third quarter.
In closing, we are very pleased with the progress made during the final quarter of the year in this COVID-sensitive environment with our credit metrics ending at very satisfactory levels as we enter 2021 very well-positioned.
We continue to closely monitor our book, and remain focused on managing risk in our COVID-impacted sectors as we work to further reduce portfolio exposure to these higher-risk industries that continue to face uncertainty in the current environment.
As we move into a new year, we look forward to an improving economy and an expanded lending opportunities ahead.
Today, I will discuss our financial results and discuss some of our current expectations.
As noted on Slide 5, fourth quarter operating earnings per share totaled $0.28, an increase of 8% compared to the third quarter.
Full year 2020 operating earnings per share totaled $0.96, after adjusting for $46 million of significant items.
While this year brought unique economic challenges, we were well-positioned to adapt to the environment and provide strong internal capital generation.
Vince mentioned, we increased our tangible book value per share to $7.88, an increase of 5% from 2019.
Despite a volatile year for equity markets, our combined dividend yield and share repurchases [Technical Issues] above pure median levels.
Looking at 2021, we are confident that returning to generating core positive operating leverage on a quarterly basis will lead to better overall performance compared to 2020.
Let's review the fourth quarter starting with the balance sheet on Page 10.
Average balances for total loans decreased 1.6% from the third quarter, largely due to the previously mentioned indirect auto sale of $500 million that was completed in November 2020.
Linked-quarter, PPP balances decreased $377 million on a spot basis as we received forgiveness remittances from the SBA throughout December.
Commercial loan line utilization rate is at 32%, which is about 8% or $0.5 billion in funded balances below what we would characterize as a normal level, creating upside for loan growth as the economy improves.
Average deposits grew 2%, with 4% growth in interest-bearing deposits and 3% growth in non-interest-bearing deposits, partially offset by an 8% decrease in time deposits.
This continued total deposit growth provided ample liquidity and afforded us the opportunity to pay down an additional $300 million in FHLB borrowings with a rate of 2.35% during the fourth quarter.
Excluding the FHLB debt extinguishment from the third quarter, a total of $715 million in borrowings were terminated during the year with expense savings that will continue through 2022.
As Vince noted, FNB is in a very strong position to fund future loan growth, strengthen capital and enhance liquidity.
Turning to the income statement.
Net interest income increased $7.3 million or 3.2% compared to the third quarter and the net interest margin increased 8 basis points to 2.87%.
PPP loans added 17 basis points to the net interest margin in the fourth quarter as the level of net interest income from PPP increased $8.8 million compared to the third quarter, offsetting 3 basis points of negative impact from higher average cash balances, and 3 basis points of lower purchase accounting benefit on acquired loans.
Interest-bearing deposit costs improved 12 basis points to 43 basis points, and on a spot basis, were down another 7 basis points to 36 basis points.
Let's now look at non-interest income and expense on Slides 13 and 14.
Operating non-interest income totaled $81 million when excluding the $12.3 million loss and FHLB debt extinguishment.
Mortgage banking income remains strong at $15 million with large contributions from the Mid-Atlantic and Pittsburgh regions, and the results benefited from above average gain on sale margins compared to historical levels.
For the full year of 2020, mortgage banking increased 57%, reaching a record $50 million.
Wealth Management increased 5% from the third quarter due to the expanded footprint and positive market impacts on assets under management.
Capital markets, wealth management, mortgage banking and insurance are businesses we have strategically invested in over the last five years, providing diversified revenue streams that have served us well in this low interest rate environment.
In the aggregate, revenue from these businesses increased $32 million or 24% to $162 million for the full year of 2020.
Looking on Slide 14, non-interest expense totaled $199.3 million, an increase of $19.1 million or 10.6%, which included $10.5 million of branch consolidation expenses and $4.7 million of COVID-19-related expenses in the fourth quarter of 2020, compared to $2.7 million of COVID-19 expenses in the third quarter.
Excluding these COVID-19 and branch consolidation expenses, non-interest expense increased $6.6 million or 3.7%, primarily driven by higher production-related commissions and incentives, as well as $2 million in outside services.
Ratio of tangible common equity to tangible assets increased 5 basis points to 7.24% compared to September 30, 2020, with net PPP loan balances negatively impacting the December 31 and September 30, 2020 TCE ratios by 45 and 56 basis points, respectively.
Compared to the year ago quarter, the ratio decreased 35 -- 34 basis points due primarily to the PPP loan impact and the 2020 Day 1 CECL adoption impact.
On a linked-quarter basis, our CET1 ratio improved to an estimated 9.9% reflecting FNBs strategy to optimize capital deployment, increased over 40 basis points from year-end 2019.
Turning to our outlook, we'll offer quarterly guidance for the first quarter of 2021 and some high-level expectations for the full year of 2021.
I'll note that our assumptions do not take into account the impact of recently announced stimulus programs.
For the first quarter, we expect period end loans to decline low single-digits relative to December 31 assuming approximately $700 million of additional forgiveness for PPP loans in the first quarter.
Excluding PPP and purchase accounting, we expect first quarter net interest income to be at a similar level compared to the fourth quarter.
We expect continued solid contributions from fee-based businesses with continued strength in capital markets and mortgage banking, resulting in total non-interest income in the mid-to-high $70 million range.
We expect expenses to be down slightly compared to the fourth quarter operating level.
For the full year of 2021, on a full year basis, we expect total revenues to decline low single-digits as top-line organic growth is offset by reduced contributions from purchase accounting compared to 2020.
We would expect loans to grow in the mid single-digits from the end of 2020, excluding impact of PPP forgiveness and net of any new PPP originations.
I'll note, this does not account for any additional government stimulus and assumes some level of line of credit utilization increase throughout the year as the U.S. economic conditions are expected to improve from where we stand today.
We would expect transaction deposits excluding PPP and stimulus to increase mid single-digits from year-end 2020.
We expect full year provision for credit losses to be in the $70 million to $80 million range based on our current macroeconomic assumptions.
We expect full year expenses to be down slightly from the $720 million operating level in 2020 as we execute on our expense savings target of $20 million, while continuing to invest in technology and infrastructure in 2021.
Lastly, we expect the effective tax rate to be around 19%, assuming no change to the statutory corporate tax rate of 21%.
Throughout the last year, we continued to focus our efforts on optimizing our online and physical delivery team to improve the customer experience, improve operational efficiency, as well as investing in our infrastructure and technology.
Our commitment to reinvesting a portion of our cost savings initiatives in our digital delivery channels was instrumental in our success, serving our clients and growing loans, deposits and fee-based business.
FNB will be adding a number of features to our mobile app in the first quarter, providing an improved offering to clients.
Once again, we received national recognition by S&P Global for having a top mobile application in terms of features and functionality for banks in the Northeast regional banking space.
As consumer preferences continue to evolve, our investment in our digital platform will enable us to reach new households in our expanded footprint.
Moving forward, we are focused on increasing the number of interaction through our online and mobile channels.
We are confident our digital offering, robust omnichannel presence, and innovative customer interface will provide multiple ways for our clients to utilize our complete offering of FNB products and services.
Their efforts resulted in a safer work environment and the preservation of shareholder value and positions our company for better outcomes as we move into 2021.
We expect the resilient U.S. economy to perform at a higher level as the effect of expected stimulus and the rollout of the vaccine take hold, accelerating business activity and economic growth as we move through the year.
We will continue to serve our constituencies by actively engaging with communities, investing in our dedicated employees, and working continuously to deliver greater shareholder value.
 Assistant:

Chosen response:
compname posts q4 adj earnings per share $0.28.
q4 non-gaap earnings per share $0.28 excluding items.


Prompt:
Human: We'll begin with a brief strategic overview from Randy, Mike will review the title business, Chris will review F&G, and Tony will finish with a review of the financial highlights.
There is significant uncertainty about the duration and extent of the impact of this pandemic.
Because such statements are based on expectations as to future financial and operating results, and are not statements of fact, actual results may differ materially from those projected.
It will also be available through phone replay beginning at 3:00 p.m. Eastern Time today and through Wednesday, August 11.
We are excited about our second quarter performance as our title business continues to produce record results, and F&G set records for its retail annuity sales, while expanding into new institutional channels, further validating our decision to acquire the company just over one year ago.
We are building a company designed to deliver more stable earnings and cash flow as market conditions change and interest rates eventually rise and pressure our title business, and we can already see the early signs of our success.
Their dedication has allowed us to continue to lead the title industry in revenue, earnings, margins and market share, and produce the best performance in the history of not only the company, but the entire industry.
In the second quarter, we generated record adjusted pre-tax title margins of $688 million compared to $378 million in the year ago quarter and a 22.7% adjusted pre-tax title margin compared with 18.4% in the second quarter of 2020.
Our margin for the quarter matches our record setting margin achieved in the fourth quarter of 2020 and benefited from our investments in technology, operations and automation over the years as we have worked to improve our efficiency in our title business and maximize our profitability over market cycles.
Turning to F&G, when we closed on our acquisition in June of 2020, we expected F&G to provide a counterbalance to our earnings, which are highly sensitive to mortgage interest rates.
We also believe that our acquisition would accelerate F&G's ratings upgrades and open new channels of distribution to enhance their sales growth.
F&G has far exceeded our expectations as we have gained significant momentum in the bank and broker-dealer channels in the first year of launch, as well as strong sales growth in existing channels.
While delivering record retail sales, we have maintained attractive spreads despite the low interest rate environment that we continue to experience.
F&G has also entered the institutional market with a $750 million funding agreement-backed note issuance, and was just awarded its first pension risk transfer deal over the past week.
F&G ended the second quarter with nearly 320 -- three -- $32 billion in ending assets under management, which is a 20% increase since the acquisition, and it's well on its way toward achieving our goal of doubling assets as sales momentum accelerates.
Looking forward, we will continue to evaluate our capital allocation strategy as we remain committed to long-term value creation for our shareholders, while also focusing on supporting the future growth of our business.
Given our strong earnings and cash flows through the first half of the year, yesterday we announced a quarterly cash dividend of $0.40 per share, an increase of 11% from our previous quarterly dividend and our Board authorized a 3-year share repurchase program of up to 25 million shares.
At the end of 2020, we announced a share buyback plan of $500 million, and during the second quarter, we purchased four million shares for $183 million at an average price of $45.74 per share.
Since announcing the buyback plan, we have purchased 11 million shares for $452 million at an average price of $41.09 per share.
Randy touched upon our record second quarter results as we continued to benefit from low interest rates, driving strong origination demand, the continued rebound in commercial real estate activity and the efforts and focus of our employees in taking care of our customers.
For the second quarter, we generated adjusted pre-tax title earnings of $688 million, an 82% increase over the second quarter of 2020.
Our adjusted pre-tax title margin was 22.7%, a 430 basis point increase over the prior year quarter.
We had a 17% increase in direct orders closed, driven by a 57% increase in daily purchase orders closed and a 65% increase in total commercial orders closed, partially offset by a 5% decrease in daily refinance orders closed.
Total commercial revenue was a record $347 million compared with the year ago quarter of $184 million due to the 65% increase in closed orders and a 14% increase in total commercial fee per file compared with the year ago quarter.
For the second quarter, total orders opened averaged 10,900 per day with April at 10,700, May at 11,200 and June at 10,700.
For July, total orders opened were 11,000 per day as we continue to see strong demand and purchase activity, while the refinance market continues to moderate as compared with last year's robust levels.
Daily purchase orders opened were up 41% in the quarter versus the prior year.
For July, daily purchase orders opened were up 4% versus the prior year.
Refinance orders opened decreased by 25% on a daily basis versus the second quarter of 2020.
For July, daily refinance orders opened were down 32% versus the prior year.
Lastly, total commercial orders opened per day increased by 58% over the second quarter of 2020.
Commercial orders opened per day were at all-time record levels through the second quarter.
For July, total commercial orders opened per day were up 15% over July of 2020.
We remain optimistic that the order volumes we have seen over the last several quarters will drive continued strong commercial performance in the second half of 2021.
As Randy mentioned, our strong results are a clear validation of the investments we have made into technology and how we integrate automation throughout our operations to improve efficiencies and enhance client satisfaction.
We have spoken often about our focus on expense management in real time as open orders rise and fall.
But we also believe that our longer-term focus on integrating automation has significantly improved our performance and profitability through market cycles.
Additionally, we continue to enhance our inHere Experience Platform, which transforms the real estate transaction experience by improving the safety and simplicity needed to start, track, notarize and close a real estate transaction.
During the quarter, we reached an important milestone, as more than one million consumers completed our digital start here opening package, confirming our belief that customers are ready and eager for digital solutions for real estate transactions.
Last week, we announced Notarize inHere, which ensures that the same level of service, security and integrity our customers demand during in-person notarial acts is available when completing their most significant financial transaction online.
We are focused on improving our customers' experience and believe the inHere platform will not only improve client satisfaction, but will also help us to improve our efficiency by reducing the hours spent on a transaction while also positioning FNF to take market share.
As Randy mentioned, one year into our acquisition by FNF, F&G is executing on diversifying our sources of premium, transforming a previously monoline business into a leading provider of solutions in both retail and institutional markets in the life and annuity space.
As we grow, we're focused on generating scale benefits by increasing assets under management, while leveraging Blackstone's unique investment management capabilities to deliver consistent spread.
Additionally, we've made significant investments in our operating platform to become a best-of-breed service provider and allowing us to leverage efficiencies as we scale.
In the second quarter, we had record annuity sales in our retail channel of $1.6 billion, up 80% from the second quarter of 2020 and 9% from the sequential quarter.
We continue to see success with core agent distribution and also with our two newer distribution channels, independent broker-dealers and banks, which generated over $900 million of new premium in the first half of 2021 and are on track to comfortably exceed $1.5 billion for the full year.
In the institutional channel, where we market to institutional clients, we have successfully entered the funding agreement-backed note market and secured our first pension risk transfer transaction over the last week.
Let me provide a few brief details.
In June, F&G issued a $750 million funding agreement-backed note or FABN, at an attractive coupon of 1.75%.
Market reception to our initial FABN issuance was extremely strong, with an order book in excess of $2 billion.
And going forward, we intend to opportunistically execute additional FABN issuances.
Also, we have successfully entered the pension risk transfer market, securing our first deal in late July.
We will assume approximately $65 million in pension liabilities and provide annuity benefits to over 1,200 retirees in a transaction expected to close this month.
In addition, we have a very robust pipeline of deals where we will be bidding on in the third quarter.
Both channels contributed to top line sales results that surpassed our expectations, driven by very strong growth in the retail channels and the launch into two additional institutional channels.
Total sales were $2.7 billion in the second quarter compared to $1.7 billion in the sequential quarter and $1.1 billion in the second quarter of 2020.
For the first half of the year, we achieved record sales of $4.3 billion, nearly double the $2.2 billion of total sales in the first half of 2020.
With these strong top line results, average assets under management or AAUM, has surpassed the $30 billion milestone driven by approximately $1.7 billion of net new business flows in the second quarter.
Next, turning to spread, our results continue to be strong.
Total product net investment spread was 295 basis points in the second quarter and FIA net investment spread was 335 basis points.
Investment yield, an important driver of product margin, was above expectation, driven by onetime items in the quarter, primarily favorable investment income on CLO redemptions held at a discount to par.
Adjusting for those notable items though, total product spread was 255 basis points, in line with our historical trend and consistent with our disciplined approach to pricing.
Adjusted net earnings for the second quarter were $92 million.
Strong earnings were driven by record AAUM and strong and consistent spread results as we have maintained disciplined pricing actions on both new business as well as our in-force book.
Net favorable items in the period were $22 million.
Adjusted net earnings, excluding those notable items were $70 million, up from $66 million in the first quarter.
In summary, it's been a defining first half of the year for F&G.
Our profitable growth strategy is firing on all cylinders, and we have successfully diversified our sources of premiums, a key strategic focus.
We remain excited about the opportunity to further contribute to the overall FNF strategy in the years ahead.
We generated $3.9 billion in total revenue in the second quarter, with the title segment producing $3 billion, F&G producing $802 million and the corporate segment generating $56 million.
Second quarter net earnings were $552 million, which includes net recognized gains of $232 million versus net recognized gains of $162 million in the second quarter of 2020.
The net recognized gains and losses in each period are primarily due to mark-to-market accounting treatment of equity and preferred stock securities, whether the securities were disposed of in the quarter or continue to be held in our investment portfolio.
Excluding net recognized gains and losses, our total revenue was $3.6 billion as compared with $2.3 billion in the second quarter of 2020.
Adjusted net earnings from continuing operations were $592 million or $2.06 per diluted share.
The title segment contributed $526 million, F&G contributed $92 million and the Corporate and Other segment had an adjusted net loss of $26 million.
Including net recognized losses of $30 million, our title segment generated $3 billion in total revenue for the second quarter compared with $2.1 billion in the second quarter of 2020.
Direct premiums increased by 57% versus the second quarter of 2020, agency premiums grew by 60% and escrow, title-related and other fees increased by 28% versus the prior year.
Personnel costs increased by 32% and other operating expenses increased by 14%.
All in, the title business generated a 22.7% adjusted pre-tax title margin, representing a 430 basis point increase versus the second quarter of 2020.
Interest and investment income in the title and corporate segments of $27 million, declined $14 million as compared with the prior year quarter due to decreases in dividends received on common and preferred stock, decreases in bond interest and a slight decrease in income from our 1031 exchange business.
FNF debt outstanding was $2.7 billion on June 30 for a debt-to-total capital ratio of 23.2%.
Our title claims paid of $56 million were $41 million lower than our provision of $97 million for the second quarter.
The carried reserve for title claim losses is currently $91 million or 5.8% above the actuary central estimate.
We continue to provide for title claims at 4.5% of total title premiums.
Finally, our title and corporate investment portfolio totaled $6.3 billion at June 30.
Included in the $6.3 billion are fixed maturity and preferred securities of $2.2 billion, with an average duration of 2.9 years and an average rating of A2, equity securities of $1.2 billion, short-term and other investments of $400 million and cash of $2.5 billion.
We ended the quarter with over $1.2 billion in cash and short-term liquid investments at the holding company level.
 Assistant:

Chosen response:
compname reports second quarter 2021 diluted earnings per share from continuing operations of $1.90 and adjusted diluted earnings per share from continuing operations of $2.06.
compname reports second quarter 2021 pre-tax title margin of 21.5% and adjusted pre-tax title margin of 22.7%.
q2 adjusted earnings per share $2.06 from continuing operations.
q2 revenue $3.9 billion versus $2.4 billion.