Please turn to Slides 2 and 3. As always, today's teleconference will contain forward-looking statements based on current expectations regarding important risk factors. Please review the information on these slides and at the end of today's earnings release explaining factors that may affect these expectations. Now I'll turn the call over to Paul for a review of our financialsPaul Huck Thanks, Simon. Good morning, everyone, and thanks for joining us today. Please turn to Slide #4. We are off to a great start to fiscal 2011. For the quarter, sales of $2.4 billion were 10% higher versus prior year on growth in our Electronics and Performance Materials, Tonnage and Merchant segments. Underlying sales increased 11% on 10% higher volumes and 1% higher pricing. Sequentially, sales were higher 2%. Underlying sales were up 1% on higher pricing in Merchant Gases and our Electronics and Performance Materials segments. Volumes were flat mainly due to seasonality. Operating income of $404 million increased 17% from prior year on higher volumes. Our operating margin improved to 16.9%, up 100 basis points versus prior year. We are on track to deliver on our 70% goal for fiscal 2011. Equity affiliate income was up slightly versus prior year. Improved volumes and cost performance were partially offset by a charge for the anticipated sale of a plant in one of our affiliates. Absent this loss, sequential equity affiliate income would have been slightly higher. As we've seen in prior years, our tax rate in quarter one was lower than our expected average rate for the full year due to the timing of certain tax credits and adjustments. We still expect our full year tax rate to be consistent with the 25% and 26% guidance range given last quarter. For the quarter, net income increased 17% and, diluted earnings per share increased by 16%, each versus prior year. Return on capital employed for the quarter improved to 13.2%, up 140 basis points.
Turning to Slide 5 for a review of the factors that affected the quarter's performance in terms of earnings per share. Our adjusted earnings per share increased by $0.19. Higher volumes in Electronics and Performance Materials, Tonnage and Merchant segments increased earnings per share by $0.25, year-on-year. The impact of pricing, combined with energy and raw material costs, netted to zero. Costs were $0.02 unfavorable as our productivity gains were more than offset by higher operating and distribution costs. Currency translation and foreign exchange netted to a $0.02 unfavorable impact. And higher non-controlling interest and shares outstanding cost us $0.01 each. In summary, a very good start to the year at the top end of our expectations.Now I'll turn the call over to Simon to review our business segment results. Simon? Simon Moore Thanks, Paul. Please turn to Slide 6, Merchant Gases. Merchant Gases sales of $988 million were up 6% versus prior year. Underlying sales improved by 8% on increased volumes and higher pricing. Currency reduced sales by 2%. Year-on-year sales improvement was driven by very strong Asia growth and improving volumes in North America and Europe liquid bulk products. Sequentially, sales were up 4%, primarily due to currency. Underlying sales were up 1%. Merchant Gases operating income of $201 million was up 6% versus prior year and up 8% sequentially. Segment operating margin of 20.3% was flat versus prior year and up 80 basis points sequentially. Sequential margins expanded driven by improved pricing across all regions. During the quarter, we announced the construction of four new projects in India through our INOX Air Products joint venture. Three new merchant air separation units will provide efficient and reliable supply for the strong growth opportunities we are seeing in India. The fourth project will be a piggyback ASU and hydrogen plant to supply gasses to St. Gobain Glass India and liquid products for the merchant market. These investments strengthen INOX's Air Products' leading merchant presence throughout India. Also during the quarter, we brought China's first air separation unit utilizing LNG cold energy on stream. This JV with CNOOC, the China National Offshore Oil Company (sic) [Corporation] will provide a low-cost supply of over 600 tons of oxygen, nitrogen and argon to supply the fast-growing industrial gases market in Fujian Province. Read the rest of this transcript for free on seekingalpha.com