Our first quarter consolidated net sales were strong, growing 22.6% year-over-year to $347.6 million on significantly higher sales volumes.
Our gross margin expanded to 46.7% from 45.7% in the prior year quarter, primarily due to lower labor, factory, warehouse and shipping costs, which were partially offset by higher material costs.
Our solid gross margin, combined with our diligent expense management and reduced costs due to COVID-19, drove a significant year-over-year increase of 38.6% in our income from operations to $68.4 million and an increase of 39.8% in our earnings per diluted share to $1.16.
The increase in sales volume we experienced in the first quarter was primarily a result of the continued momentum in the home center distribution channel, where sales increased over 60% compared to the prior year period.
As we generally experience a multiple month lag in demand from the time of the start, in the first quarter, we benefited from strong fourth quarter 2020 housing starts, which grew over 10% year-over-year.
As previously announced in early February, we implemented price increases ranging from 5% to 12% depending on the product mix for certain of our wood connectors, fasteners and concrete products in the U.S. in an effort to offset rising material costs.
More recently, we announced the second price increase ranging from 6% to 12% primarily for our wood connector products in the U.S. in an effort to further offset rising material costs.
If we can accomplish this, we have no doubt we will be able to accomplish ambition Number 4, which is to continue our above-market growth relative to U.S. housing starts.
As Karen highlighted, our consolidated net sales were strong, increasing 22.6% to $347.6 million.
Within the North America segment, our net sales increased 20.7% to $300.6 million, primarily due to higher sales volumes in our home center distribution channel, which includes our home center and co-op customers.
In Europe, net sales increased 35.3% to $44.3 million, primarily due to higher sales volumes in local currency.
Europe's sales also benefited by approximately $3.6 million of positive foreign currency translations resulting from some Europe currencies strengthening against the United States dollar.
Wood construction products represented 87% of total sales, compared to 86% and concrete construction products represented 13% of total sales compared to 14%.
Consolidated gross profit increased by 25.2% to $162.3 million, which resulted in a stronger Q1 gross margin of 46.7% compared to last year.
Gross margin increased by 100 basis points, primarily due to lower labor, factory, warehouse and shipping costs, which were partially offset by higher material costs.
On a segment basis, our gross margin in North America increased to 48.5% compared to 47.7%, while in Europe, our gross margin increased to 34.4% compared to 32.7%.
From a product perspective, our first quarter gross profit margin on wood products was 46.6% compared to 45.4% in the prior year quarter and was 42.5% for concrete products, the same as the prior year quarter.
Research and development and engineering expenses increased 9% to $14.6 million, primarily due to increases in personnel costs, professional fees and patent costs.
Selling expenses increased 8% to $30.8 million due to increases in stock-based compensation, personnel costs and professional fees, offset by a decrease in travel-related costs.
On a segment basis, selling expenses in North America were up 9.1% and in Europe, they were up 2.8%.
General and administrative expenses increased 26.2% to $48.6 million, primarily due to increases in stock-based compensation, personnel costs and professional fees and amortization and depreciation expense, offset by a decrease in travel-related costs.
Total operating expenses were $94.0 million, an increase of $13.6 million or approximately 16.9%.
As a percentage of net sales, total operating expenses were 27%, an improvement of 130 basis points compared to 28.3%.
Our solid topline performance combined with our stronger Q1 gross margin and diligent expense management helped drive a 38.6% increase in consolidated income from operations to $68.4 million compared to $49.4 million.
In North America, income from operations increased 29.5% to $69.4 million, primarily due to increased gross profit, partly offset by higher operating expenses.
In Europe, income from operations increased 35.3% to $2.3 million, primarily due to increased gross profit.
On a consolidated basis, our operating income margin of 19.7% increased by approximately 230 basis points.
Our effective tax rate increased to 24.3% from 21.3% due to a lower windfall tax credit on the vesting of restricted stock units.
Accordingly, net income totaled $50.4 million, or $1.16 per fully diluted share compared to $36.8 million or $0.83 per fully diluted share.
At March 31, cash and cash equivalents totaled $257.4 million, a decrease of $44.3 million compared to March 31, 2020.
As of March 31, 2021, the full $300 million on our primary line of credit was available for borrowing and we remain debt-free with a small portion of capital leases, mostly unchanged from year-end.
Our inventory position of $296.8 million at March 31 increased by $13 million from our balance at December 31, as we continue to see higher levels of construction activity and raw material prices along with the unprecedented demand we've experienced throughout the pandemic.
As a result of our improved profitability and effective working capital management, we generated strong cash flow from operations of $18.5 million for the first quarter of 2021, an increase of $5.8 million or 45.5%.
We used approximately $10.5 million for capital expenditures during the quarter.
In regard to stockholder returns, we paid $10 million in dividends during the first quarter.
As of March 31, 2021, we had the full amount of our $100 million share repurchase authorization available, which will remain in effect through the end of 2021.
We're updating our operating margin outlook to now be in the range of 19.5% to 22%, compared to our original estimate of 16.5% to 18.5%.
In addition, we expect our effective tax rate to be in the range of 25% to 26%, including both federal and state income tax rates.
And finally, we are reiterating our capital expenditure outlook to be in the range of $50 million to $55 million, including approximately $10 million to $15 million, which will be used for safety and maintenance capex.

Summary:
Our first quarter consolidated net sales were strong, growing 22.6% year-over-year to $347.6 million on significantly higher sales volumes.
Our solid gross margin, combined with our diligent expense management and reduced costs due to COVID-19, drove a significant year-over-year increase of 38.6% in our income from operations to $68.4 million and an increase of 39.8% in our earnings per diluted share to $1.16.
As Karen highlighted, our consolidated net sales were strong, increasing 22.6% to $347.6 million.
Accordingly, net income totaled $50.4 million, or $1.16 per fully diluted share compared to $36.8 million or $0.83 per fully diluted share.
We're updating our operating margin outlook to now be in the range of 19.5% to 22%, compared to our original estimate of 16.5% to 18.5%.