We will also discuss certain non-GAAP financial measures, which are described in more detail in this morning's release and on our website. Reconciliations to the most directly comparable GAAP financial measures and other associated disclosures are contained in our earnings release and on our website.Our comments on forward-looking statements and non-GAAP financial measures, apply both to the prepared remarks and to the Q&A. We want to remind everyone that this webcast contains time-sensitive information that is accurate as of today. Any redistribution, retransmission, or reproduction of this call without company consent is prohibited. With that, I will turn the call over to Fred. Alfred Festa Thanks, Mark. Hello, everyone, and thank you for joining us for our third quarter earnings call. Q3 was a very good quarter for Grace. We grew sales 27% with a solid contribution from both businesses. Gross profit dollars rose 29% and gross margin increased to 36.5%. Our adjusted EBIT increased 55% and adjusted EBIT margin increased 300 basis points to 16.4%. Finally, our adjusted EBIT return on invested capital increased to 34.2%. These results reflect the high value of our product and the success of our business teams in responding to changing customer requirements and changes in our operating environment. We have a balanced portfolio of businesses, and a diversified geographic footprint with great positions in the industries we serve. This coupled with a very disciplined playbook allows us to continue to deliver exceptional performance. Grace Davison had a strong quarter, and is on track to deliver its third consecutive year of double-digit earnings growth. The team has consistently demonstrated their ability to effectively address marketplace challenges. They responded quickly and effectively to the severe downturn that began in fourth quarter 2008, and expanded gross margins during 2009. They also responded quickly and effectively to the jump in Rare Earth cost last year, launched a series of very successful new products, and further expanded gross margins this year. Their consistent customer focus, agility, and disciplined execution give me confidence they will continue to perform well, even in an uncertain economic environment.
Grave Davison delivered good year-over-year price and earnings growth this quarter. Sales volumes declined about 3% from the strong third quarter of 2010. About half of this decline was segment share loss, and about half was related to slowing demand.We have focused strongly on margins this year to ensure we are covering the cost of higher raw materials and we have lost some business as a result. Our teams will use our high-value products to recover the lost sales volume while maintaining our higher gross margin. Our recent new product introductions and capital investments, including last year’s Specialty Catalyst acquisition, give us the products and capacity; we need to replace loss sales volumes at better margins. Grace Construction Products also performed very well this quarter, despite the continuing challenges in many of its markets. Overall sales increased 22%, and sales in emerging regions grew 25% in the quarter. The team also expanded gross margins for the third consecutive quarter, and now it’s catching up to the 10% increase in raw materials we have seen since Q3 2010. The GCP team continues to work very hard to improve profitability. In addition to improving gross margins, GCP is working to improve productivity across the business. Sales per employee increased 8.5% versus the prior year quarter, reflecting sales volume growth, especially in our new plants, and strong cost control in the mature markets. Strategically, GCP has solidified its position in North and South America, and is showing sustained progress in building its business in Asia. Europe remains challenging, especially Southern Europe. And we are not achieving our target levels of returns there. Hudson will comment further on the actions to improve GCPs profitability in his section. Read the rest of this transcript for free on seekingalpha.com