Jim and I will now review our third quarter results and outlook for the balance of 2011, then we'll be available to answer questions.James S. Sawyer Thank you, Kelcey, and good morning, everyone. Please turn to Slide #3 for our consolidated results. Praxair delivered another solid quarter, with earnings per share growth of 16% versus the 2010 third quarter. Our backlog of new projects under contract and construction is a record $2.7 billion, and we continue to win a disproportionate share of new on-site projects. Furthermore, due to our tight capital discipline and focus on productivity, we remain confident in our ability to deliver double-digit earnings growth. Consolidated sales in the third quarter were $2.9 billion, up 14% versus the prior-year quarter. Sales were higher to all major end markets, with the strongest year-over-year growth in manufacturing, metals, energy and chemicals. Our volumes contributed 6% growth, and price contributed 3%. New project startups in Asia, South America and North America also contributed to the volume growth. Sequentially, sales grew 1% from higher volumes in most geographies, partially offset by lower volume in Europe, most of which is a seasonal pattern. Operating profit grew to $632 million in the quarter, 15% above the prior year, and the operating margin was a strong 21.8%. Higher volumes, combined with price and productivity savings, were the primary contributors to the growth. Net income of $429 million rose 14% from the prior year, and earnings per share were a record $1.40, up 16% from prior year. Earnings per share grew faster than net income due to share repurchases under our $1.5 billion share repurchase program authorized in mid-2010. $294 million remains available under this program, which we expect to complete during the first quarter of next year. Cash flow generation was very strong this quarter. Cash flow from operations was $732 million or about 25% of sales. Cash flow funded $458 million of capital expenditures, primarily for the construction of new on-site plants around the world. In addition, we paid dividends of $150 million and repurchased stock of $251 million, net of issuances.
During the third quarter, we issued $500 million of 10-year notes at a rate of 3%. Our debt-to-capital ratio for the quarter increased to 50.8% due to the increase in debt and the impact of currency translation within equity. Our debt-to-EBITDA ratio remained at a strong 1.7. After-tax return on capital for the quarter improved to 14.8%, and return on equity was 28.3%.Now Kelcey will discuss our segment results. Please turn to Page 4. Kelcey E. Hoyt Thanks, Jim. Sales in North America were $1.4 billion, 11% above the prior year quarter due primarily to underlying volume growth and price. Merchant liquid and packaged gas volumes both showed solid growth versus the prior year as manufacturing continued to improve. Sequentially, underlying sales grew 3%. The impact of the divestiture of the U.S. home care business, which was completed in early March of this year, reduced sales for the quarter by 3% year-over-year. Organic merchant sales grew 12% year-over-year with broad-based demand for most liquid products, including oxygen, nitrogen, argon and liquid hydrogen. Sequentially, organic merchant sales grew 5%, with demand strongest for use of liquid nitrogen in Canadian frac-ing. On-site sales grew year-over-year due to strong metals and chemicals demand. The sequential volume increase was primarily driven by energy and more modest chemical market demand. Packaged gas sales continues to improve as manufacturing and construction activity gradually increases in the United States. In PDI, our U.S. and Canadian business, same-store sales, which excludes currency and acquisitions, were 14% above last year and steady sequentially. Gases were up 10%, and hardgoods were up 22%. We expect that gas and hardgoods growth will eventually become more aligned as we move to a later stage of the manufacturing recovery. North American operating profit was $350 million, 11% above the prior year quarter. The operating margin was a strong 24.5%. Through our effective implementation of price increases, we offset inflation and power cost increases that typically occur in the hotter weather months. Read the rest of this transcript for free on seekingalpha.com