Sales, excluding PPE, increased 11.5% over prior year driven by continued point-of-sale strength and broad-based inventory restocking by retailers.
We're pleased with the global improvement in Champion as sales increased nearly 130% from the second quarter.
Compared to last year, sales declined 9% due primarily to our sports apparel business where COVID-related headwinds have essentially shut down sporting events and college bookstores.
Excluding this, sales would have been down 2%.
Third, we delivered another strong cash flow quarter, generating nearly $250 million of operating cash flow.
While we now expect to end the year with higher-than-anticipated PPE inventory, we continue to expect to generate positive operating cash flow in the second half and for the full year.
And the fourth takeaway for the quarter, we further strengthened our liquidity, ending the quarter with $2 billion of liquidity, which we believe provides us with plenty of operating flexibility in this uncertain environment.
As expected, margins declined over prior year but less than we were anticipating, and we generated $249 million of operating cash flow, further strengthening our liquidity position.
Third quarter sales increased 3% over prior year to $1.81 billion, with foreign exchange rates accounting for 80 basis points of the quarter's growth.
Excluding $179 million of PPE sales, apparel revenue declined 7% compared to prior year.
This represents a significant improvement from last quarter's 40% decline as each segment experienced a sequential improvement in year-over-year revenue trends.
Adjusted gross margin of 36.7% decreased approximately 275 basis points over last year due to increased inventory reserves as well as negative manufacturing variances, which were incurred earlier in the year, rolling off the balance sheet and onto the P&L.
Adjusted operating margin declined approximately 170 basis points over prior year to 12.6% as the gross margin pressure and higher operating costs from COVID were partially offset by ongoing SG&A controls as well as benefits from our temporary cost savings initiatives.
Restructuring and other related charges were $53 million in the quarter.
Approximately $49 million are nonrecurring costs from restarting portions of our manufacturing network that closed for approximately 10 weeks beginning in March due to the COVID pandemic.
The remaining $4 million of these costs relates to our previously disclosed supply chain restructuring actions and program exit costs.
Our tax rate for the quarter was 17.3%, which was in line with our expectations.
And adjusted and GAAP earnings per share decreased 11% and 43% over prior year to $0.42 and $0.29, respectively.
For the quarter, U.S. Innerwear sales increased 41% over prior year driven by a 15% increase in basics, a 7% increase in intimates and the inclusion of $166 million of PPE revenue.
Excluding PPE, U.S. Innerwear sales increased 11.5% over prior year due to the continued positive point-of-sale trends and inventory restocking by retailers.
In our basics business, we experienced growth in each product category, which drove approximately 170 basis points of market share gains in the quarter.
For the quarter, Innerwear's operating margin expanded approximately 80 basis points over prior year to 21.7% driven by fixed cost leverage from higher unit volumes as well as favorable product mix.
Revenue declined 27% compared to last year, which is an improvement from the second quarter's 52% decline.
Activewear's operating margin was 9.1% for the third quarter.
Touching briefly on Champion, sales of the Champion brand within our Activewear segment increased approximately 85% from the second quarter.
Compared to last year, sales declined 27%, with the vast majority of the decline due to the COVID-challenged sports apparel business.
Revenue declined 5% compared to last year on a reported basis and 7% on a constant currency basis.
Adjusting for PPE sales, core International revenue declined 7% as compared to prior year, which is a significant improvement from a 44% decline in the second quarter.
For the quarter, International Champion sales increased 5% over prior year.
International segment's operating margin declined approximately 100 basis points over prior year to 15.2% driven by deleverage from lower sales volumes, which was partially offset by continued tight SG&A cost management.
We generated $249 million of operating cash flows in the quarter.
Looking at our balance sheet, inventory increased 4% over prior year which was in line with sales growth and includes approximately $400 million of PPE inventory.
Excluding PPE, inventory declined 15% compared to prior year.
Leverage at the end of the quarter was 3.3 times on a net debt to adjusted EBITDA basis, which was comparable to last year.
We further strengthened our liquidity position in the quarter even while reducing debt by approximately $130 million and paying our regular quarterly dividend.
We ended the quarter with $2 billion of liquidity above the $1.8 billion at the end of the second quarter.
For the fourth quarter, we expect total sales of $1.60 billion to $1.66 billion, which, at the midpoint, implies a 2% decline over prior year.
Included in our sales outlook is approximately $50 million of PPE sales, approximately $10 million of foreign exchange benefit and contributions from a 53rd week.
We expect adjusted operating profit of $160 million to $180 million, which, at the midpoint, implies an operating margin of 10.4%.
We expect interest and other expense of approximately $50 million and a tax rate of approximately 17.5%.
Our guidance for adjusted and GAAP earnings per share range from $0.25 to $0.30 and $0.24 to $0.29, respectively.
And our guidance for full year 2020 operating cash flow is $300 million to $400 million, which includes the impact from the higher-than-anticipated PPE inventory.
Based on our year-to-date cash flow, this implies fourth quarter operating cash flow of approximately $70 million to $170 million.

Summary:
While we now expect to end the year with higher-than-anticipated PPE inventory, we continue to expect to generate positive operating cash flow in the second half and for the full year.
Third quarter sales increased 3% over prior year to $1.81 billion, with foreign exchange rates accounting for 80 basis points of the quarter's growth.
And adjusted and GAAP earnings per share decreased 11% and 43% over prior year to $0.42 and $0.29, respectively.
For the fourth quarter, we expect total sales of $1.60 billion to $1.66 billion, which, at the midpoint, implies a 2% decline over prior year.
Our guidance for adjusted and GAAP earnings per share range from $0.25 to $0.30 and $0.24 to $0.29, respectively.
And our guidance for full year 2020 operating cash flow is $300 million to $400 million, which includes the impact from the higher-than-anticipated PPE inventory.