Despite the ongoing challenges caused by COVID-19, the demand for EnerSys products was clear during the period as we reported strong third quarter fiscal '21 adjusted earnings of $1.27 per diluted share, which included a $0.10 benefit from the settlement of our claim related to the September 29 fire in our Richmond, Kentucky facility less $0.03 per share in foreign currency losses.
Although those restructuring benefits have not yet impacted our earnings, they will grow in magnitude throughout calendar year 2021, reaching nearly a $20 million annual run rate by the end of fiscal year 2022.
Our third quarter net sales decreased 2% over the prior year to $751 million due to a 3% decrease from volume, net of a 1% increase from currency.
On a line of business basis, our third quarter net sales in the motive power were down 4% to $304 million, while Energy Systems net sales were down 2% at $337 million, while specialty increased 7% in the third quarter to $109 million.
Motive power suffered a 5% decline in volume due to the pandemic, net of a 1% increase in FX.
Energy Systems had a 4% decrease from volume, net of a 2% improvement from currency.
Specialty added 6% in volume improvements and 1% increase from currency.
On a geographical basis, net sales for the Americas were down 1% year-over-year to $499 million, with a 1-point decrease from currency.
EMEA was down 4% to $194 million on a 9% volume decline, net of a 5% improvement in currency, while Asia was flat at $58 million.
On a sequential basis, third quarter net sales were up 6% compared to the second quarter, driven by volume improvements.
On a line of business basis, Specialty increased 5%, with NorthStar continuing to contribute its capacity for transportation sales.
And motive power was up 15% as it rebounds from the pandemic, while Energy Systems was down 1%.
On a geographical basis, Americas was up 4%, EMEA was up 13% and Asia was up 4%.
On a year-over-year basis, adjusted consolidated operating earnings in the third quarter increased approximately $15 million to $78 million, with the operating margin up 210 basis points.
On a sequential basis, our third quarter operating earnings improved $12 million or 110 basis points to 10.4%.
We settled our claim for the Richmond fire, which was -- which resulted in a $6 million benefit in the quarter.
$4 million was a gain on the replacement of equipment reflected in operating expenses from the property policy, while $2 million was a final recovery on the business interruption policy and is credited to cost of sales.
Operating expenses when excluding highlighted items were at 14.8% of sales for the third quarter compared to $16.4 million in the prior year as we reduced our spending by $15 million year-over-year and by 100 basis points sequentially.
Excluded from operating expenses recorded on a GAAP basis in Q3, our pre-tax charges of $22 million, primarily related to $6 million in Alpha and NorthStar amortization and $12 million in restructuring charges for the previously announced closure of our flooded motive power manufacturing site in Hagen, Germany.
Excluding those charges, our motive power business achieved operating earnings of 13.3% or 330 basis points higher than the 10% in the third quarter of last year, due primarily to the insurance claim recovery of $6 million described earlier.
On a sequential basis, motive power's third quarter OE also increased 420 basis points from the 9.2% posted in the second quarter, due primarily to sequential increases of nearly $5 million in recovery of the business interruption and other proceeds from the Richmond fire.
OE dollars for motive power increased nearly $9 million from the prior year despite lower volume due to its lower operating expenses and $6 million in insurance recovery, while OE increased $16 million from the prior quarter on higher volume and $5 million for more in insurance recovery.
Meanwhile, Energy Systems operating earnings percentage of 7.4% was up from last year's 6.3%, but down from last quarter's 8.8%.
OE dollars increased $3 million from the prior year, primarily from lower operating expenses, but decreased $5 million from the prior quarter on lower volume and higher operating expenses.
Specialty operating earnings percentage of 11.9% was up from last year's 10.1% and up from last quarter's 11.4%.
OE dollars increased nearly $3 million from the prior year on higher volume and lower operating expenses while increasing $1 million from the prior quarter on higher volume.
As previously reflected on slide 10, our third quarter adjusted consolidated operating earnings of $78 million was an increase of $15 million or 23% from the prior year.
Our adjusted consolidated net earnings of $55 million was nearly $11 million higher than the prior year.
Improvements in the adjusted net earnings reflect the rise in operating earnings, net $3 million in foreign currency losses, primarily on unfavorable rate changes on intercompany borrowings.
Our adjusted effective tax rate of 17% for the third quarter was slightly higher than the prior year's rate of 16%, but in line with the prior quarter's rate of 17%.
Fiscal 2019's full year rate was 17%, while our fiscal 2020 rate was 18%, which is consistent with our current expectations for fiscal 2021.
EPS increased 22% to $1.27 on higher net earnings.
As a reminder, we still have nearly $50 million of share buybacks authorized, but have no immediate plans to execute any repurchases with perhaps the exception of the modest annual repurchase made to offset employee stock plan dilution.
We have also included our year-to-date results on slides 12 and 13 for your information, but I do not intend to cover these in detail.
We now have nearly $489 million of cash on hand, and our credit agreement leverage ratio is below 2.0 times, which allows over $600 million in committed additional borrowing capacity.
We expect our leverage ratio to remain below 2.0 times for the balance of fiscal 2021.
We generated over $218 million in free cash flow through three quarters of fiscal 2021.
Our Q3 free cash flow generation was very strong at $41 million despite the drag of rising working capital from increased revenue.
Capital expenditures year-to-date of $54 million were at our expectations.
Our capital expectation for fiscal 2021 of $75 million has expanded again slightly as the economic outlook improved.
So we believe we will begin enjoying about half of the expected $20 million per year of savings next fiscal year, with the full benefit thereafter.
We anticipate our gross profit rate to remain near 25% in Q4 of fiscal 2021 as lower utilization in some of our factories over the holidays and from enhanced COVID restrictions will impact our P&L in Q4.
With some of the uncertainty from our election and the pandemic behind us, we currently feel we have enough visibility to provide guidance in the range of $1.25 to $1.31 in our fourth fiscal quarter.

Summary:
Despite the ongoing challenges caused by COVID-19, the demand for EnerSys products was clear during the period as we reported strong third quarter fiscal '21 adjusted earnings of $1.27 per diluted share, which included a $0.10 benefit from the settlement of our claim related to the September 29 fire in our Richmond, Kentucky facility less $0.03 per share in foreign currency losses.
EPS increased 22% to $1.27 on higher net earnings.