Charles T. Lauber
Executive Vice President and Chief Financial Officer at A. O. Smith
Thank you, Kevin, and good morning, everyone. I'm on slide sevem. Third quarter sales in the North America segment were $653 million, a 1% decrease compared with 2021. Pricing actions largely on water heaters were more than offset by lower volumes of residential water heaters. Sales in the quarter also benefited from higher volumes of commercial water heaters and boilers. Giant acquired in October 2021, added $25 million to North America sales. North America adjusted segment earnings of $133 million decreased 11% compared with the same period of 2021. The earnings benefit of inflation-related price increases was more than offset by lower residential water heater volumes and related production inefficiencies as well as higher material and freight costs.
Adjusted segment operating margin of 20.4% declined compared with 2021 operating margin, primarily due to the headwinds I mentioned and acquisition of Giant, which has lower margins than our overall legacy water heater business. Adjusted segment earnings and adjusted segment margin excluded a pretax gain of $11.5 million due to a judgment obtained against a competitor related to the infringement of one of our patents and pretax nonoperating pension expenses of $2.6 million. Moving to slide eight.
Rest of the World segment sales of $230 million decreased 13% year-over-year. Lower sales volumes were primarily driven by consumer demand headwinds in China related to COVID-19-related restrictions. Currency translation unfavorably impacted segment sales by approximately $16 million, $12 million of which impacted China sales. Sales in India grew 16% in local currency in the third quarter of 2022 on strong demand for our water heating and water treating products. We view India as a long-term growth opportunity given its attractive growth characteristics and changes in demographics. Rest of the World segment earnings of $22 million decreased 19% compared to segment earnings in the third quarter of 2021. In China, the impact of lower volumes was partially offset by lower selling and advertising expenses.
Rest of the World segment margin of 9.5% was down 70 basis points from the same period last year primarily due to the negative effects of foreign currency translation as well as higher advertising expenses to promote new products in India, partially offset by improvement in China operating margin. Cash flow from operations and free cash flow of $215 million and $164 million, respectively, during the first nine months of 2022, decreased compared to the first nine months of 2021 due to lower customer deposits in China, higher incentive accruals from 2021 due to record sales and earnings and greater cash outlays in 2022 for increased levels of safety stock on higher cost inventory that more than offset lower accounts receivable balances.
Cash flow from operations and free cash flow reported today are each $34 million higher than the preliminary cash flows reported on October 13 as a result of separately reporting the impact of foreign currency exchange impacts on working capital. Our cash balance totaled $417 million at the end of September, and our net cash position was $129 million. Our leverage ratio was 14% as measured by total debt to total capital. Our strong annual free cash flow and solid balance sheet allow us to continue to focus on capital allocation priorities and return cash to shareholders. Earlier this month, our Board approved a 7% increase in our quarterly dividend rate to $0.30 per share. We repurchased 4.5 million shares of common stock in the first nine months of 2022 for a total of $282 million. Let's now turn to slide 10. In addition to returning capital to shareholders, we see opportunities for organic growth, innovation and new product development across all of our product lines and geographies.
The strength of our balance sheet allows us to pursue strategic acquisitions even in times of economic uncertainty. As a result of our activities to identify water heating and water treating assets that meet our financial metrics, we recognized corporate expenses of $4.3 million related to costs associated with the terminated acquisition. These costs were excluded from adjusted earnings and adjusted earnings per share. The strength of our balance sheet allows us to maintain our strong track record of delivering returns to shareholders. This has been done through both our dividend that we have increased for 30 consecutive years as well as share repurchases that have totaled $650 million since the beginning of 2021.
Please turn to slide 11 and our 2022 full year earnings guidance and outlook. We maintain our 2022 outlook that we updated in conjunction with our October 13 press release with an expected earnings per share range of $1.29 to $1.39 per share our adjusted earnings per share range of $3.05 to $3.15 per share. Our outlook is based on a number of key assumptions, including, no further significant surges of COVID-19 cases in the U.S. and that COVID-19-related restrictions in China remain approximately at the levels that they are today, and do not significantly impact our operations, our employees, customers or suppliers. Steel indices began to stabilize at the end of 2021 and have moderated through the current year.
Our guidance assumes that average steel prices in the fourth quarter will be approximately 15% lower than the third quarter of this year. We continue to see elevated non-steel materials and transportation costs. We saw continued improvement in our supply chain in the quarter. However, challenges still persist. We remain in close contact with our suppliers and logistics providers to troubleshoot, manage and resolve bottlenecks, but the environment remains unpredictable. We continue to see the benefit from multiple 2021 price increases, compounding to approximately 50% for water heaters. We expect to generate free cash flow of approximately $400 million to $425 million. For the year, capex is expected to be approximately $70 million to $75 million.
Adjusted corporate and other expenses are expected to be approximately $55 million. Our effective tax rate is estimated to be between 23.5% to 24%. And we expect to repurchase $400 million worth of shares of our common stock, resulting in outstanding average diluted shares of $156 million for 2022. Based on these assumptions, the midpoint of our adjusted EPS range represents an increase of 5% compared to 2021.
I'll now turn the call over -- back over to Kevin, who will provide more color on our key metrics and top line growth outlook and segment expectations for 2022, staying on slide 11. Kevin?