I refer you to the latest Forms 10-K and 10-Q National Oilwell Varco has on file with the Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business. Further information regarding these, as well as supplemental financial and operating information, may be found within our press release, on our website at www.nov.com or in our filings with the SEC. Later on this call, we will answer your questions, which we ask you to limit to 2 in order to permit more participation.Now I will turn the call over to Pete for his opening comments. Merrill A. Miller Thank you, Loren, and good morning, everyone. Earlier today, we announced the earnings of $532 million or $1.25 per fully diluted share on revenues of $3.74 billion. This compares to earnings of $481 million or $1.13 per fully diluted share in the second quarter of 2011, and third quarter 2010 earnings of $406 million or $0.97 per fully diluted share. We are very pleased with these results, and they reflect the confidence our customers have in our products and services. Additionally, we also announced today new capital equipment orders in the quarter of $3.94 billion, a new record for the company. These new orders increased the total capital equipment backlog to $10.27 billion, a 33% increase from the second quarter of 2011. Clay will expand on both the financials and backlog in just a moment. I would like to thank all of the National Oilwell Varco employees worldwide for their continued tremendous efforts in achieving these results. In particular, I want to thank the Rig Technology sales groups for their yeoman efforts in establishing a record level of new capital orders. Clay? Clay C. Williams Thanks, Pete. National Oilwell Varco performed exceptionally well in the third quarter, generating $532 million in net income, as Pete said, or $1.25 per share fully diluted on $3.7 billion of revenues. Sequentially, earnings per share improved 11% on 6% higher revenues. Year-over-year, third quarter earnings per share improved 30% on 24% higher revenues. Transaction-related charges were $6 million pretax or $0.01 per share in the third quarter, roughly the same EPS impact as in both the second quarter 2011, as well as the third quarter a year ago. Excluding transaction charges, earnings were $1.26 per fully diluted share in the third quarter.
Operating profit, excluding transaction charges, was $778 million or 20.8% of sales, up $66 million from the prior quarter, representing 29% flow-through or operating leverage. Compared to the third quarter of 2010, excluding transaction charges, operating profit improved $180 million, representing 25% leverage or flow-through.There is much to highlight this quarter as performance was excellent across the board. All 3 of our segments posted higher revenues and operating profit both sequentially, as well as year-over-year. Rig Technology landed a record level of orders for capital equipment, including the largest order ever in the history of our company, during the third quarter. Petroleum Services & Supplies generated record quarterly revenues and pushed operating margins above the 20% level. Distribution Services posted its third highest quarterly sales ever at very strong margins approaching 8%. Overall, we are pleased with the exceptional performance and grateful for the hard work and terrific execution by NOV's nearly 50,000 employees. Two clear broad themes we've highlighted before, shales and deepwater, continued to shape our industry and drove higher demand for NOV's products and services in the third quarter. First, unconventional shale and tight sand drilling, along with seasonal recovery in Canada, led to a worldwide rig count increase of 12% sequentially and 15% year-over-year. Within North America, unconventional plays account for more than half of all drilling as propelling many NOV products and services ever higher. All 3 NOV segments benefited from rising unconventional drilling during the third quarter, and we believe shale drilling will continue to shape National Oilwell Varco's performance for many years to come, owing to our strong position in the supply of key technologies, which make shales work. Read the rest of this transcript for free on seekingalpha.com