In addition, we have included some non-GAAP financials measures in our discussions. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release in the Appendix to today's presentation and on our website at www.alcoa.com under the Invest section. Any reference in our discussion today to EBITDA means adjusted EBITDA, for which we have provided calculations and reconciliations in the Appendix.I would now like to turn it over to Chuck McLane. Charles D. McLane Thanks, Roy, and we appreciate everybody taking the time to join us today. I would go to the first slide, and we look to summarize and evaluate this quarter's results. There were 2 significant developments. First, we have experienced significant commodity price deflation in our Alumina and Aluminum segments. While aluminum demand continues to grow globally and regional premiums remain strong, macroeconomic worries and various commodity investors have driven an 8% drop in the price of aluminum quarter-on-quarter. The result is a decrease in revenue and profits in both segments. Despite the price deterioration, both businesses were able to generate sufficient volume and productivity savings to essentially offset inflationary headwinds. Secondly, results in flat-rolled products were degraded by the continuing sovereign debt crisis in the Eurozone and the resulting market uncertainty. These conditions have driven falling confidence in both consumers and businesses. Fearful of a slowing economy, our European customers reduced their orders dramatically even into September and drove a significant reduction in this segment's profitability. The Engineered Products and Solutions segment experienced some seasonal weakness as well as the impact of a flood in its Bloomsburg, Pennsylvania, facility, which completely shuttered a building and construction facility. This segment continues to provide very strong results even in these uncertain times. It's difficult for us to see the slowdown in our mid and downstream segments following a record first half. Yet we are taking action to combat the demand destruction, and we have plans in place should the uncertainty persist. Now let's go to the third quarter overview.
Income from continuing operations in the quarter was $172 million or $0.15 per share. This represents a sequential decrease of 47%, but an increase of 182% versus the third quarter of 2010. An 8% drop in the LME, combined with European weakness, contributed to the decrease in revenues on a sequential basis. On a year-over-year basis, sales remained strong with all of our major markets showing greater than 8% increase in revenue.EBITDA was $821 million, which represented a 13% EBITDA margin. Free cash flow in the quarter was $164 million, bringing the cash generated this year to $250 million. We continue to operate our businesses at lower levels of working capital with a drop of 5 days compared to the third quarter of 2010, roughly equivalent to $350 million in cash. Our debt-to-capital ratio stood at 33.7% or 200 basis points lower than the third quarter of 2010 and is within our 30% to 35% target range. During the quarter, we reduced our net debt by $109 million. Lastly, liquidity remained strong with cash on hand of $1.3 billion. Now let's review the income statement. The $166 million sequential decrease in revenue was primarily driven by the drop in LME. Higher volumes in the primary metal segment were offset by lower sales in flat-rolled products, primarily in Europe. On a prior year basis, higher prices drove about half of the $1.1 billion improvement with the remainder driven by improving volumes across all of our businesses. Cost of goods sold as a percent of revenue was 82.4%, an increase of 270 basis points from the second quarter but 110 basis points improvement from the third quarter 2010. SG&A as a percent of sales declined by 30 basis points sequentially driven by falling prices, but showed a 30 basis point improvement versus the third quarter of last year.
Our effective tax rate for the quarter was 19.6% or 24.6% excluding the discrete tax items. This brings our year-to-date rate to 26.3%. With increasing uncertainty across our markets, we will continue to experience swings in the rate as profit drivers within each taxing jurisdiction remain volatile. Let's now move on to a review of the special items in the third quarter.Read the rest of this transcript for free on seekingalpha.com