Along those lines, recall that in the first quarter of 2020 we launched a rationalization of our locomotive fleet by 703 units, which resulted in a non-cash charge of $385 million, so we will speak to the quarterly results excluding that charge.
For the quarter, revenue increased 1% due primarily to volume growth up 3% year-over-year.
At the same time, expenses declined 3% or $48 million compared to our adjusted first quarter of 2020.
These trends have been improving since we implemented Top 21 in mid-2019, but the team has been able to both accelerate and extend the improvement and we are very well positioned to continue these trends, leveraging our efficiency initiatives with rising volumes.
Despite the difficult operating conditions, overall revenue improved 1% year-over-year to $2.6 billion while volume grew 3%.
Merchandise revenue fell 4% from prior year levels on a 3% volume decline.
March U.S. light vehicle sales surged to a 17.7 million unit seasonally adjusted annual rate, the second highest March ever, while inventories are at a 10-year low.
Merchandise revenue per unit excluding fuel reached a record high for the quarter, delivering 24 consecutive quarters of year-over-year improvement in this market.
Volume growth was driven by a continuation of the inventory replenishment cycle combined with the tight truck market and strength in consumer activity as retail sales grew 9.8% in March, the largest sequential increase since May 2020 when sales initially rebounded as states reopened from shutdowns.
Intermodal revenue per unit excluding fuel improved 6% year-over-year, supported by continued strength in the LTL market driven by growth in e-commerce.
Our coal business delivered 5% revenue growth in the quarter.
Revenue per unit improved 3% year-over-year, inclusive of a $9 million incremental gain from volume shortfall revenue.
Consensus for U.S. GDP growth is north of 6%, the highest in the last 40 years.
PMI rose to 64.7 in March, hitting the highest level since 1983, while inventories remain low.
Spending on durable goods is expected to grow 15% in 2021, which bodes well for our domestic intermodal franchise that is closely correlated with consumption markets.
On Slide 15, walking you through our summarized results compared with an adjusted first quarter 2020, we reported an OR of 61.5%, which was a 220 basis point improvement, and an earnings per share improvement of $0.08.
I will note that the $0.08 improvement in earnings per share was dampened by the absence of a gain recognized last year from a 2012 income tax refund that equated to $0.09, so core earnings per share improvement in the quarter was $0.17.
Moving to Slide 16, revenue grew 1% in the quarter due primarily to the 3% increase in volume year-over-year, with growth in intermodal and coal more than offsetting declines in merchandise.
At the same time, we drove operating expenses down by 3% as we harvested additional benefits from workforce and asset productivity.
The volume growth coupled with the productivity drove the operating ratio down to a record low 61.5%, improving 220 basis points year-over-year and 30 basis points sequentially versus Q4.
This produced operating income of $1 billion, another record, up $62 million or 7% year-over-year, and we generated first quarter free cash flow of $750 million, also a record, up $161 million or 27% versus the first quarter of 2020.
Moving to a drill down of operating expense improvement on Slide 17, the reduction of $48 million or 3% comes with improvements in nearly all expense categories.
Comp and benefits declined $11 million or 2% from lower employment costs related to a workforce that was 12% smaller than a year ago and 2% smaller than the fourth quarter.
Purchase services and rents were collectively down $10 million or 2% as reduced freight car expenses more than offset higher spend associated with technology investments and increased intermodal volumes.
When matched to a 3% volume increase, the 3% decline in opex provides another quarter of additional productivity, building in the work we've done over the past several quarters, as you'll see here on Slide 18.
From the quarter that we launched our Top 21 operating plan, we have made meaningful progress on our workforce productivity with GTMs per employee up 16% since the third quarter of 2019 and a 340 basis point improvement in our operating ratio.
Turning to Slide 19 for the remainder of the P&L below operating income, you'll see that other income net of $7 million is $15 million of 68% unfavorable year-over-year due primarily to lower net returns on our company-owned life insurance investments.
Our effective tax rate in the quarter was just over 22%, and recall last Q1 we had the 2012 tax refund that resulted in a lower effective tax rate.
As a result, net income increased by 1% compared to pre-tax earnings growth of 5%.
Earnings per share rose by 3%, supported by 2.3 million shares that we repurchased in the quarter at an average price of $254.
Wrapping up now with our free cash flow on Slide 20, free cash flow at $750 million was buoyed by strong operating cash conversion and a relatively modest $265 million in property additions in the quarter, which was below our annual targeted run rate for the year due to timing issues, including weather related delays and capital spend.
Years ago, we recognized the importance of reducing our environment footprint, beginning in 2007 when we first established our sustainability program.
Here we highlight a few key milestones and also show a few examples of external recognition, including recently being named by the Wall Street Journal as one of the 100 Most Sustainably Managed Companies.
Although we don't generally update guidance, given the unusual circumstances in the first quarter with February's extreme cold and a global supply chain disruption, let me wrap up restating our confidence in our ability to meet the market for full year 2021 with the expectation that strength in consumer-oriented and manufacturing markets will drive 9% revenue growth year-over-year.
For the full year, we expect to achieve more than 300 basis points of OR improvement versus our adjusted 2020 result, and we expect to end 2021 with a 60% run rate OR.
Before we open the call to Q&A, I want to quickly address the proposed transactions involving another Class 1 railroad.

Summary:
On Slide 15, walking you through our summarized results compared with an adjusted first quarter 2020, we reported an OR of 61.5%, which was a 220 basis point improvement, and an earnings per share improvement of $0.08.
The volume growth coupled with the productivity drove the operating ratio down to a record low 61.5%, improving 220 basis points year-over-year and 30 basis points sequentially versus Q4.
This produced operating income of $1 billion, another record, up $62 million or 7% year-over-year, and we generated first quarter free cash flow of $750 million, also a record, up $161 million or 27% versus the first quarter of 2020.
From the quarter that we launched our Top 21 operating plan, we have made meaningful progress on our workforce productivity with GTMs per employee up 16% since the third quarter of 2019 and a 340 basis point improvement in our operating ratio.