Along those lines, recall that in the third quarter of 2020, we recorded an impairment charge of $99 million related to an equity method investment.
While volume held steady with last year, revenue grew an impressive 14% and our 60.2% operating ratio reflects a 230-point improvement on a year-over-year adjusted basis, our second-best OR performance ever, outpaced only by last quarter's 58.3% mark.
The quarterly operating metrics on slide six clearly show that, once again, we generated positive operating leverage on flat unit volumes and GTMs that were up 5%.
While we are proactively hiring train crews, efficiency in all areas of our operations, including engineering, mechanical and communications and signals, enabled us to run the network with 7% fewer people in the quarter compared to a year ago.
We achieved total revenue of $2.9 billion, representing a 14% increase from the same period last year despite flat volumes.
Revenue in our merchandise segment improved 10% year-over-year, while volume increased to 5%.
Steel shipments were up an impressive 34% from the same period a year ago.
The combination of drayage shortages, warehouse productivity, equipment availability, labor force participation and rail network fluidity pressured intermodal volume throughout the quarter, resulting in a 4% year-over-year decline.
Overcoming these headwinds, we delivered revenue growth of 16% in the third quarter due to higher revenue from storage services, increased fuel surcharge revenue and price strength.
Coal revenue increased 32% in the third quarter as both domestic and global economies continued to recover from the pandemic and drive demand for electric power.
The mix shift from utility to export, coupled with price gains, led to a 20% increase in revenue per unit less fuel for coal in the third quarter, a new record for the franchise.
Ongoing demand for steel will also be a growth driver, with forecast for industrial production up more than 5% year-over-year in the fourth quarter and steel prices currently above $1,900 a ton.
A projected 4% year-over-year fourth quarter decline in US.
I appreciate the quick action and effort from our team, and I'm pleased to report that this issue is effectively behind us as we have repaired and returned approximately 95% of the recall chassis back to service.
We are continuously innovating to compete in the $800 billion plus truck and logistics market, as shown by our Thoroughbred Freight Transfer or TFT service launched earlier this year.
On slide 16, as Alan just detailed, revenues were up 14% on flat volumes.
With operating expenses up 10%, we delivered strong incremental margins leading to 230 basis points of operating ratio improvement, driving us to a Q3 record of 60.2%.
The improvement Alan detailed in RPU, coupled with strong productivity, led to record Q3 operating income, with growth of 21% or nearly $200 million.
And our free cash flow is also at record levels, a 33% increase during these nine months compared to last year.
While operating expenses grew $149 million or 10%, it's up only 4% or $67 million, apart from fuel cost increases.
The fuel cost increase of $82 million is driven mainly by price, but the 5% increase in GTMs also drove more consumption.
You'll see purchase services up $35 million, with the majority of the year-over-year increase in areas.
It is up 5%, but you'll note the $40 million in savings from 7% lower headcount that more than offset increases in pay rates and over time.
Meanwhile, incentive compensation comparisons in the quarter are a headwind of $43 million, similar to what we reported in the second quarter, reflecting our strong 2021 financial outlook compared to lower accrual rates last year.
You'll see that other income of $14 million is $25 million unfavorable year-over-year, and that is due almost entirely to lower net returns from company-owned life insurance.
Our effective tax rate in the quarter was 23.6%, close to our federal and state statutory rates, but unlike Q3 last year where the rate was 21.9% and benefited from tax advantages related to both COLI investment gains and higher stock-based compensation.
Net income increased by 17% and while earnings per share grew by 22%, supported by 3.6 million shares we repurchased in the quarter.
As I have mentioned, free cash flow is a record through nine months of 2021 at $2.3 billion, buoyed by very strong operating cash generation, and that translates into a 102% free cash flow conversion.
While property additions are trending a bit lower than run rate for our $1.6 billion guidance number, capital spend is never linear, and we expect fourth quarter property additions will get us close to the $1.6 billion.
We first demonstrated our commitment to sustainability with our visionary appointment of a Chief Sustainability Officer back in 2007, the first in the industry.
Building upon the momentum earlier this year with the approval of our science-based targets for greenhouse gas emissions reduction and our launch of $500 million in green bonds in the second quarter, we're excited to report another set of milestones on our sustainability journey.
And just earlier this month, we announced our decision to purchase 100% renewable energy to power company operations in Altoona in Reading, Pennsylvania.
As shared previously, we expect to achieve an operating ratio improvement above 400 basis points for the full year versus our adjusted 2020 result.
And there's likely upside to the 12% year-over-year revenue growth, as strength in our consumer-oriented and manufacturing markets drive the majority of the growth.

Summary:
While volume held steady with last year, revenue grew an impressive 14% and our 60.2% operating ratio reflects a 230-point improvement on a year-over-year adjusted basis, our second-best OR performance ever, outpaced only by last quarter's 58.3% mark.
On slide 16, as Alan just detailed, revenues were up 14% on flat volumes.
With operating expenses up 10%, we delivered strong incremental margins leading to 230 basis points of operating ratio improvement, driving us to a Q3 record of 60.2%.