The good news is that Polaris continues to outperform as evidenced by our record year-to-date sales and earnings performance, with sales and earnings up 24% and 59%, respectively, versus 2020.
Additionally, our PG&A and International businesses performed well, with PG&A sales growing 8% and our International business delivering strong sales growth of 21% in Q3.
We are taking aggressive steps to combat these headwinds, but given we are 10 months into the year, the impact of any additional countermeasures may not be realized until sometime next year.
Our third-quarter North American retail sales were down 24% from the positive 15% reported in the third quarter of 2020.
This resulted in retail being down 13% on a two-year basis.
Snowmobiles retail was down 30% in the quarter.
Dealer inventory levels ended the quarter down 46% on a year-over-year basis and down 75% when compared to pre-COVID levels in Q3 of 2019.
That's over $300 million of additional costs that we did not anticipate when the year began.
During the quarter, we introduced 15 new ORV models, product enhancements and limited edition models, including a new midsized RANGER with more comfort, storage and a noticeably quieter ride.
And for our younger riders, we introduced a new RZR 200 EFI with industry-leading safety and technology features, including standard hard doors and high visibility front and rear LED lights, digital speed limiting to control top speeds and geo-fencing to allow parents to control where the vehicle is allowed to go.
Third-quarter sales were flat on a GAAP and adjusted basis versus the prior year, finishing at $1.96 billion.
Third-quarter earnings per share on a GAAP basis was $1.84.
Adjusted earnings per share was $1.98, which was down from the $2.85 we reported in Q3 last year as expected.
Adjusted gross margins were down approximately 360 basis points on a year-over-year basis, mostly due to increased input costs from logistics, commodities, plant inefficiencies and labor.
Adjusted operating expenses were up 4%, primarily due to increased research and development expenditures and, to a lesser degree, increased selling and marketing costs during the quarter.
Income from financial services declined 38% during the quarter, primarily due to lower retail credit income.
And finally, the tax rate finished at 20.5%, compared to 23.7% in the third quarter last year due to favorable adjustments related to research and development credits taken in the quarter.
Average selling prices for all segments were up, ORV increased about 5%; Motorcycles were up approximately 10%; Adjacent Markets increased about 1%; and Boats was up approximately 30% for the quarter.
Our International sales increased 21% during the quarter, with all regions and segments growing sales as many economies continued to gain traction as they recovered from earlier COVID shutdowns.
Currency added 3 percentage points to the International growth for the quarter.
Parts, garments and accessories sales increased 8% during the quarter, with strong demand across all segments and categories in that business, particularly parts and accessories.
Total company sales are now expected to finish at approximately $8.15 billion for the year.
At this projected sales level, full-year adjusted earnings per share guidance for 2021 is expected to finish at approximately $9 per diluted share.
While we are disappointed that we have to update our guidance, keep in mind, this is $0.25 per share higher than the high end of our original 2021 guidance range.
Moving down the P&L, we have made the following revisions: adjusted gross profit margins are now expected to be down approximately 70 basis points, which is at the lower end of our previous guidance.
Mike mentioned the $300 million-plus increase in input costs since the beginning of the year, but just in the third quarter alone, our input costs from logistics, ocean and truck rates, commodities, labor rates and plant inefficiencies increased over $100 million or approximately 580 basis points when compared to the prior-year third quarter.
Adjusted operating expenses are now expected to improve 90 basis points as a percentage of sales versus last year, again, at the lower end of our previous guidance range, driven by the lower sales growth expectations, partially offset by prudent cost management.
And we're adjusting our income tax provision rate expectations for the full year to be in the range of 22% to 22.5%, an improvement over our previously issued guidance, reflecting the flow-through of favorable tax adjustments related to the R&D credit.
We are expanding our Monterrey facility by over 400,000 square feet, adding approximately 35% more capacity for RZR in general over the next year to accommodate the model year '22 vehicles, the new RZRs coming in Q4 and additional ORV models expected to launch over the next couple of years.
For Boats, we added approximately 55,000 square feet of manufacturing capacity in Elkhart, Indiana to meet the demand for Bennington, and we brought the Syracuse, Indiana facility back online to support strong demand for our Hurricane deck boats.
Year-to-date third quarter operating cash flow finished at $153 million, down significantly, compared to the same period last year.
As such, we've made the decision to divest our GEM and Taylor-Dunn businesses, with the expectation that the transaction will be completed by year-end.

Summary:
Third-quarter earnings per share on a GAAP basis was $1.84.
Adjusted earnings per share was $1.98, which was down from the $2.85 we reported in Q3 last year as expected.
Average selling prices for all segments were up, ORV increased about 5%; Motorcycles were up approximately 10%; Adjacent Markets increased about 1%; and Boats was up approximately 30% for the quarter.
Total company sales are now expected to finish at approximately $8.15 billion for the year.
At this projected sales level, full-year adjusted earnings per share guidance for 2021 is expected to finish at approximately $9 per diluted share.
As such, we've made the decision to divest our GEM and Taylor-Dunn businesses, with the expectation that the transaction will be completed by year-end.