After steep declines in the second quarter, third quarter sales were up 2% year-over-year on a constant currency basis and adjusted earnings per share grew 1%.
First, from a customer perspective, our largest segment, Pharma, was the primary growth driver in the quarter with 4% organic growth, followed by Industrial, which grew 3% and Academic and Government, which declined 7%.
From a product perspective, our Waters branded products and services grew 3% organically, while TA declined by 8% on a constant currency basis.
Services grew 4%, while consumables business grew approximately 7% organically, driven largely by pharma.
Moreover, our strong base of small molecules, which represents approximately 75% to 80% of pharmaceutical industry sales will benefit from the growth of CROs, oligonucleotides and mRNA therapeutics, as well as the increasing potential for repatriation of small molecule manufacturing.
We have a global footprint with 25% of our sales coming from China and India.
For example, there are thousands of Alliance Systems in service that are more than 20 years old and in need of an upgrade.
Second, approximately 20% of our consumable sales go through the e-commerce channel.
For many of our competitors, this number is over 50%.
In the third quarter, we recorded net sales of $594 million, an increase of approximately 2% in constant currency.
Currency translation increased sales growth by approximately 1%, resulting in sales growth of 3%, as reported.
In the quarter, sales into our pharmaceutical market increased 4%, sales into our industrial market increased 3%, while academic and governmental markets declined 7%.
Looking at our product line growth, our recurring revenue, which represents the combination of precision chemistry products and service revenue, increased by 5% in the quarter, but instrument sales declined 1%.
Industry revenues were up 7% in the third quarter, driven by strong pharma market growth.
On the service side of our business, revenues were up 4% as on-demand service bounced back to mid-single digit growth along with continued growth in service plan revenues within the Waters product line, bringing third quarter product sales down further.
Sales related to Waters branded products and services grew 3%, while sales of TA branded products and services declined 8%.
Combined LC Instrument platform sales and LC-MS Instrument platform sales were flat and TA's instrumentation system sales declined 10%.
Looking at our growth rates in the third quarter geographically and on a constant currency basis, sales in Asia were flat with China up 3%, sales in Americas grew 2% with U.S. growing 5%, and European sales grew 5%.
We are on-track to achieve cost savings of approximately $100 million for the year relative to our pre-COVID internal plan.
We achieved approximately 25% of our planned annual savings in the third quarter, bringing our year-to-date savings against our internal plan to 85%, with the majority recognized in the second quarter.
We expect to realize remaining 15% in the fourth quarter.
Returning to our third quarter non-GAAP financial performance, gross margin for the quarter was 55.8% compared to 58.2% in the third quarter of 2019, primarily as a result of unfavorable FX as well as fixed cost absorption and sales mix.
Moving down the third quarter P&L, operating expenses increased by approximately 1% on a constant currency basis and foreign currency translation increased operating expense growth by approximately 2% on a reported basis.
In the quarter, our effective operating tax rate was 15.8%, which was about flat for the prior year.
Net interest expense was $7 million, a decrease of about $1 million.
Our average share count came in at 62.3 million shares, a share count reduction of approximately 7% or about 4 million shares lower than in the third quarter of last year as a result of shares repurchased through the end of the first quarter of 2020, subsequent to which we paused the share repurchase program.
Our non-GAAP earnings per fully diluted share for the third quarter increased to $2.16 in comparison to $2.13 last year.
On a GAAP basis, our earnings per fully diluted share decreased to $2.03 compared to $2.07 last year.
In the third quarter of 2020, free cash flow grew 53% year-over-year to $190 million, after funding $28 million of capital expenditures.
Excluded from free cash flow was $7 million related to the investment in our Taunton precision chemistry operation and a $38 million transition tax payment related to 2017 U.S. Tax Reform.
In the third quarter, this resulted in $0.32 of each dollar of sales converted into free cash flow and $0.31 year-to-date.
Accounts receivable days sales outstanding came in at 76 days this quarter, down four days compared to the third quarter of last year and down 11 days from the second quarter.
Inventories decreased by $42 million in comparison to the prior year quarter, reflecting stronger revenue growth and revised production schedules.
We ended the quarter with cash and short-term investments of $397 million and debt of $1.6 billion on our balance sheet at the end of the quarter.
This resulted in a net debt position of $1.2 billion and a net debt-to-EBITDA ratio of about 1.6 times at the end of the third quarter.
We also have $1.2 billion available on our bank revolver for total available liquidity of $1.6 billion at the end of third quarter.
Our future capital structure target of approximately 2.5 times net debt-to-EBITDA remains unchanged, while our near-term focus is maintaining financial flexibility and variability in the macro environment.
We now expect full year operating expenses to be in the range of down 1% to flat year-over-year in constant currency.
For the full year, at current rates, currency translation is expected to be about neutral to sales growth to positively impact operating expense growth by less than 1 percentage point and to negatively impact earnings per share by about 3 percentage points.
For the full year, net interest expense is expected to be in the range of $38 million to $40 million primarily due to lower debt levels.

Summary:
In the third quarter, we recorded net sales of $594 million, an increase of approximately 2% in constant currency.
Our non-GAAP earnings per fully diluted share for the third quarter increased to $2.16 in comparison to $2.13 last year.
On a GAAP basis, our earnings per fully diluted share decreased to $2.03 compared to $2.07 last year.