Good morning, and welcome to Air Products & Chemicals' Third Quarter Earnings Release Conference Call. [Operator Instructions] Also, this telephone conference presentation and the comments made on behalf of Air Products are subject to copyright by Air Products and all rights are reserved. Air Products will be recording this teleconference and may publish all or a portion of the teleconference. No other recording or redistribution of this telephone conference by any other party are permitted without the express written permission of Air Products. Your participation indicates your agreement. Beginning today's call is Mr. Simon Moore, Director of Investor Relations. Mr. Moore, you may begin.

Thank you, Augusta. Good morning, and welcome to Air Products' Third Quarter 2011 Earnings Teleconference. This is Simon Moore. Today, our CFO, Paul Huck, and I will review our Q3 results and outlook for the remainder of 2011. We issued our earnings release this morning. It is available on our website, along with the slides for this teleconference. Please go to airproducts.com to access the materials. Instructions for accessing the replay of this call, beginning at 2 p.m. Eastern Time, are also available on the website. Please turn to Slide 2. 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 financials.

Thanks, Simon. Good morning, everyone, and thanks for joining us today. Please turn to Slide #3. For the quarter, sales of $2.6 billion were up 14% versus prior year. Underlying sales increased 7% on 6% higher volumes, primarily in our Electronics and Performance Materials and Tonnage segments and 1% higher pricing. Favorable currency translation contributed 5%. Sequentially, sales were 3% higher, mainly due to currency. And while we did see sequential volume growth in our Electronics and Performance Materials and Tonnage segments, Merchant Gases volumes were flat sequentially and Equipment sales declined. Operating income of $417 million increased 11% from prior year, primarily due to higher volumes. Our operating margin of 16.2% declined 40 basis points versus prior year and 80 basis points sequentially, due to higher operating costs in our Merchant segment and planned maintenance costs in our Tonnage segment. For the quarter, net income from containing operations increased 15% and diluted earnings per share increased 14%, each, versus prior year. Return on capital employed for the quarter improved to 13%, up 30 basis points. The 16.2% operating margin for this quarter is a disappointment for us. The shortfall to our goal is primarily in the Merchant segment due to 4 factors: a lack of volume growth in North -- in the North American business where we have significant available capacity, further declines in our European business, continued operating problems that resulted in higher operating and dislocation costs and tight helium supply with increased procurement costs. To remedy these issues, we are taking the following actions. In North America, we are continuing to add sales resources focused around our plants and on the end markets where we have strong offerings. For example, oil field services and electronics packaging. We've already seen signings in the third quarter improved, and we…

Thanks, Paul. Please turn to Slide 5, Merchant Gases. Merchant Gases sales of just over $1 billion were up 12% versus prior year. Underlying sales improved by 4% on 3% higher volumes, primarily in Asia and positive pricing in North America and Asia. Currency increased sales by 8%. Sequentially, sales were up 1%, with underlying sales flat and a 1% increase due to currency. Merchant Gases' operating income of $182 million was up 3% versus prior year and down 2% sequentially. Segment operating margin of 17.7% was down 160 basis points versus prior year and down 60 basis points sequentially. Versus last year, plant operating issues increased maintenance and distribution costs. These challenges resulted in higher dislocation costs to keep our customers supplied. In addition, our price increase efforts in Europe did not fully recover increased cost. Versus prior quarter, fixed and variable cost increases drove the margin decline. As Paul said, we expect margins to improve from these levels in Q4 and beyond. Let me now provide a few additional comments by region. Please turn to Slide 6. In North America, sales improved 3% versus prior year. Volumes were flat with modest liquid oxygen, nitrogen and argon growth offset by helium supply constraints limiting sales. Pricing was 3% positive, with improvement across the product lines. LOX/LIN plant loadings were in the low 70s. Signings were very strong this quarter, which will improve loadings as these new contracts take effect. In Europe, sales increased 14% versus last year, with underlying sales up 1% and a positive 13% currency impact. Volumes were up 2% with modest growth across the product lines. Pricing remained a challenge, down 1% due to competitive pressure in both healthcare and liquid bulk. LOX/LIN plant loadings are in the mid-80s. In Asia, sales were up 22% versus…

Thank you, Simon. Now if you will turn to Slide 10. I'd like to share my thoughts on our outlook. First, let's take a look at the current economic environment. This quarter, our underlying revenue growth rate declined from 12% in the first half to 7%. This is partially due to the slowing of manufacturing growth rates across all regions. Many manufacturing markets slowed as a result of spikes in commodity price inflation, high inventory levels, uncertainty over government policies and fiscal situations and weak private sector confidence. As uncertainty surrounding policy, fiscal and sovereign debt issues begin to resolve over the coming months, we would expect growth to pick up early in our fiscal 2012. Our guidance for quarter 4 is for earnings per share of $1.48 to $1.53, year-over-year growth of 10% to 13%. This is based on the following factors. On the positive side, we expect to see increased earnings sequentially from the following areas. The manufacturing economy globally should continue its gradual recovery. This, along with some seasonal boost, should result in higher sequential volumes in Merchant Gases. And in Tonnage Gases, operating income should improve significantly, on higher volumes and lower planned maintenance spending. Partially offsetting these sequential improvements will be a higher fiscal quarter 4 tax rate. Our tax rate in quarter 4 should be about 26%. For the year, we expect the rate to come in towards the lower end of our original guidance range of 25% to 26%. For fiscal year 2011, the underlying assumptions from the beginning of the year have not changed significantly. Our capital expenditure guidance is now $1.6 billion to $1.7 billion for 2011, at the top end of the original $1.5 billion to $1.7 billion range. Our full year fiscal '11 earnings per share guidance range is now $5.70 to $5.75, 14% to 15% growth over last year. While it is still early, as we look to fiscal 2012, we expect our capital spending will increase by 20% to 30% next year. We'll provide more specific guidance on next quarter's call. Now let me wrap up. Please turn to Slide 11. Last month, many of you joined us at our Investor Conference where we shared our 2015 revenue growth and margin and returning goal, along with the actions and plans we have to achieve them. All of us are excited by the growth and improvement opportunities these goals represent. We believe the market positions we have built, the customer relationships and product offerings we have cultivated and the actions we are taking to drive out costs will make us the best investment in our industry for our shareholders. Thank you, and now I'll turn the call over to Augusta to take your questions.

[Operator Instructions] Our first question will come from John McNulty of Credit Suisse. John McNulty - Crédit Suisse AG: Just 2 questions. The first one on the European pricing issues. You made a relatively strong statement that you're being attacked by your competition there, and you weren't going to let go of volumes in that situation. Can you walk us through what's actually going on, and maybe what's changed to make it such an aggressive environment there?

Yes, John, we have seen the pricing in Europe be more aggressive, particularly by some of our European competitors, as they have striven for volume. As you know, growth in Europe is not as strong as it is in other parts of the world. However, as we look at this, we were going to defend our -- we are going to defend our key accounts, and we are going to -- but we're also have a need to increase prices. And particularly in certain regions of Europe, particularly in the south, and we have started to put price increases out. The good news is that we've also seen -- we have seen our competitors start to follow those price increases. So we are encouraged. Its still early to tell, but pricing needs to get better in Europe. John McNulty - Crédit Suisse AG: Okay. And then just a follow, also somewhat tied into the competitive environment. We were a little bit surprised to see, I guess, one of your competitors announced a pretty large project down in what's historically been kind of your territory in Louisiana with regard to hydrogen. And I guess I'm wondering how we should be thinking about the competitive environment along the Gulf Coast for hydrogen projects going forward.

Well, the -- in a competitive environment, it is exactly that. We believe, as we look at this thing, as we look at this, is that with our connector project, which connects Louisiana and Texas pipeline systems, that we have the most reliable, the most efficient pipeline system in that area and that we should win the majority of projects there and maintain our position very well, with good pricing and good returns. We also won product at the same customer over which is -- was -- over which has occurred. Those things are going to happen. You're not going to win 100% of the business. But we still believe, as we said on our Investor Day, that we can maintain our share of the business here going forward.

John, as we mentioned, too, we would be expecting to be able to announce some additional hydrogen orders in this next quarter as well.

Our next question comes from Don Carson of Susquehanna Financial.

Paul, you characterized the -- you said you can still meet 17% or at least that's your goal for the year still, after this 16% to this quarter that seems somewhat aggressive, especially with the Merchant outlook. So is that implying that this sort of new 18% Electronics margin level is sustainable? I mean, you talked about how some areas of Electronics are good but growth does seem to be slowing sequentially there. So maybe if you can just walk me through how you still expect to achieve 17% operating margins this year?

Sure, Don. And one thing which we said is we just made it harder for ourselves. So we are going to have to have things go our way. But if we are going to make it, we're going to need improvement in the Merchant business itself in the fourth quarter. That means we're going to need for volumes to pick up here in the United States, in this quarter. We're going to have to see some of our pricing actions take effect in Europe. And most importantly, we're going to have to operate our plants well and remove some of these extra maintenance, operating and dislocation costs which we talked about. And that's -- and so that's how we get there, with a marked improvement in the Merchant margins. But it's hard, we're not going to get everything better all at once in that business very clearly. We didn't get there all in one quarter, we're not going to get out of it all in one quarter with these things.

The follow-up on U.S. Merchant. Your operating rates seem unusually low, low 70s, and -- because typically, you don't get pricing until you get close to 80. I know you added some plants, and that's had an impact. But is there a need to restructure some of your U.S. Merchant plants here, and then maybe close down some plants in some regions to get higher operating rates and, hence, better pricing power?

We do not believe so, Don, as we look at this. As we look at this, we look at the industry overall, and we think that given the demand structure, which is out there and the applications efforts, which we have going forward to be able to sell this product, and that we can get to a descent -- a better operating rate over time here, and that we would not take any product out at this point in time.

Our next question will come from P.J. Juvekar with Citi.

This is John Hirt standing in for P.J. this morning. I was wondering if you could break out the 10% year-over-year volume growth at the Tonnage business into new plant startups versus growth in your base book of business?

Sure. Good question, John. It's split about evenly between new projects and loading up of existing assets.

Okay. And can you give us an update on how large your project backlog is at this point, following the recent contract signing with Valero?

Sure. And we take a look at that at our backlog. Our backlog right now is in excess and well in excess of $2 billion. But as I've always said in this, you've got to be careful about just focusing on backlog number. The real good number for us here and that we are excited about is the growth in capital spending as we look to next year. We have previously been talking about a growth of 15% to 20% off of this year guidance range of $1.5 billion to $1.7 billion. Now it looks like we're coming in at the top -- towards the top end of that range, and we've taken our growth to be 20% to 30% for next year, which gives us a much better feel for -- and should give you a much better feel for what is happening because how long a project sits in backlog, it can always be there, so you're going to have something which you're billing over 3 or 4 years. It's always there. What you really want to see is the capital spending for the company growth and the CapEx. And so we don't have any real additional new support capital or replacement capital in there. That's still about $400 million a year on our guidance, but we've got very strong capital spending growth looking for next year.

John,if I could just add also to it. As Paul mentioned that our backlog is up, but just -- because when you asked the question, you mentioned the Valero. Actually, in that backlog number, there is increased that Paul mentioned, there's no project for Valero yet. We have won the order with the customer, but with our pipeline network down there, we can continue to be flexible in terms of adding demand and supply. So we will build supply, but I just wanted to emphasize that in that number, there's no project for that large order yet.

Our next question comes from Bob Koort of Goldman Sachs.

Paul, I guess I'm struck by the really strong volume, double-digit volumes in Tonnage, Electronics and Asian Merchant and how contradicted that is by no growth in North America. It seemed like in May and June, at least, the comments that you guys were a little bit more constructive in North America. So did we just -- do you think the economy stepped in a pothole? Is there something specific to the merchant market itself that's causing you problems? And then second question would be, you mentioned throwing some more feet in sales attention. I know you guys have done that in various iterations in the past in various regions. So can you talk about what the lag time is between putting those people in the field and actually starting to see some revenue on the P&L?

Sure, yes. Certainly, Bob. And if you take the economy in North America, certainly the economy in North America has kind of hit a soft patch. As we look at -- there's still a lot of uncertainty around there. You don't -- you have to be blind to not see it on every news channel and every newspaper about what's happening with the various things on the debt crisis. And that worries us. So that worries consumers, which then worries the -- a business, which has to invest. We're not creating jobs, and so if I got -- we got to get beyond this uncertainty. So hopefully, as we go through this summer, we resolve some of these issues. We start to move forward. We take some better and get firmer on what the policy actions will be, we'll see the economy -- the uncertainty start to lift a little bit off the economy and people start making decisions with regard to that. But if you look at any of the production statistics for the U.S., they have been trending downward, as far as the growth rate was concerned. The first half of our fiscal year, which is the last quarter of the calendar year in '10 and the first quarter of the calendar year in 2011, certainly had a stronger economy from a manufacturing standpoint. We were probably seeing growth somewhere in the 6% to 7% range. We are seeing growth less than half of that in the third and fourth quarter, if we're lucky, given things. So then if you look at that, the impact of our sales force, we started to increase our sales force post the -- post-thing in which happened with Airgas. And so we have already started to see the signings get better for us, and so we are seeing that with our people. So I think it doesn't take too long for our sales guys to become effective and start to add some business. It does take us, as I said, some time to bring that business onstream. So it's normally 6, maybe 9 months until that business starts to come onstream.

So Paul, with your Tonnage, oxygen and nitrogen business, excluding the hydrogen part, would that mirror the kind of volume trends you've seen in Merchant?

Yes, it would. As we look at that, yes, it would. We have seen -- we've been seeing slow growth. If you look at steel operating rates, steel operatings are a little bit better than -- and than they were a year ago, around the world, I mean. The world's hit somewhat of a soft patch here.

And bob, just as we mentioned, too, very slow growth, but we did have some positive in liquid oxygen, nitrogen and argon in North America. There was some offset with helium supply constraints, limited helium growth.

We'll go next to Mike Harrison from First Analyst.

Wanted to just ask a couple more questions around the margins in the Merchant business. You talked about the need to get volume in North America and pricing in Europe. I think both of those things are a little bit market- and competitive-environment dependent. But with respect to the operational issues and the need to reduce some of the dislocation costs, et cetera, how much of those issues have been fixed at this point and things are taken care of, and to the extent that they can give you confidence that you'll see margin improvement from those areas where you have more control over your own destiny, so to speak?

And so, Michael, the way this works is you fix one and another one popped up, and that's somewhat of what we saw between quarter 2 and quarter 3. So far, for our look at this, it's just -- it's hitting a lot of singles of making sure we run our plants well and do a better job. So it's not one issue, it's a number of issues. And they're small, and they're at different plants around here. And so it's going to be something which we're going to have to pay attention to. With regard to some of the issues, which I mentioned, argon availability has been an issue for us. We do have capacity coming onstream in the on-site area, in both the U.S. and Asia, which will help our argon availability around the world. We have -- we've brought some argon capacity on time at Xingtai Steel, as an example. That will help us. We have a plant coming onstream towards the end of our fiscal year in LaPorte, Texas, which will help us with argon availability and also cut down on the distribution costs. So it's going to be -- it's not one thing, which we can do to fix it, it's a number of things. And then it just getting on to getting the benefits out of our -- out of us, the service center investments, which we've made and things like that. So we've -- we can do these things. You've seen the progress or focus which we've made on SG&A as a company. SG&A, we didn't make a big deal about it, but SG&A is under 10% of sales this quarter. If you take currency out of it, SG&A is down year-on-year for us. So we've made -- we continue to make a lot of progress in those areas. We can take cost out. We can be successful at this. We applied the tools, we applied the information systems, which we have. We've make good decisions, and we can get this done.

And then in terms of Merchant pricing in Asia, it seems to be decelerating a little bit compared to what you showed in the last couple of quarters. Can you disaggregate for us what's going on in LOX/LIN pricing in Asia versus LAR, and maybe talk a little bit about the outlook for Merchant pricing, given the inflationary environment we're seeing in Asia?

Simon, why don't you take that?

Sure, yes, Mike. And as you pointed out, we talked to the last couple of quarters about the spot opportunities we had in argon, and so that was one of the drivers. We still had positive pricing in LOX/LIN in Asia this, quarter year-on-year, that we have done. So in the low single-digits types of numbers. So obviously, the argon spot opportunities have wound their way through the system a little bit, and so we continue to see positive pricing in Asia. I think we're able to recover the increased costs that we have there. So I think low single digits going forward is something that we would expect to be able to deliver.

And then last one is on the interest expense. You saw about a $3 million decline quarter-on-quarter, even though your debt level went up, to some extent that's driven by increased short-term borrowings. But just -- can we get any guidance maybe on what the interest expense number could look like over the next couple of quarters?

Yes. And if you take a look at that, it is obviously going to depend upon the floating rates. I mean, the -- a portion of that was rates, a portion of that was capitalized interest, which you saw here for us in this time period. But I would expect the interest rate, the interest expense for us to grow as we increase borrowings to fund the capital.

We'll go next to Kevin McCarthy of Bank of America Merrill Lynch

Paul, in Tonnage, what was the impact of the customer maintenance outages that you referenced in the quarter? And were those complete by the end of the quarter, or is there any residual spillover into the fiscal fourth quarter?

The actions and -- were complete. As we look at the maintenance spending, costs us $0.04 or so a share, when you look at that. So less substantial in a year-over-year. Quarter-to-quarter wasn't a big deal, and we probably get a benefit of a similar amount going forward into quarter 4. And they are complete, Kevin.

Very good. And then, shifting over to Merchant, Paul. In your prepared remarks, I guess you indicated 4 separate issues that you thought were pressuring margins there. One of them was tight helium supply. Can you comment on that and maybe size the impact of that, in terms of any volume constraints? I think you indicated elevated procurement costs as well there.

Right, yes. It's actually a long answer for this one. I'll try to keep it short in the interest of time. Helium has been tight around the world. It is a commodity which ships around the world. And you don't ship in the gas, you ship in liquid form, in containers. But it has been tight due to various production issues around the world and continued strong growth, a lot of the growth being driven by the electronics industry for -in the uses of helium. We do have new capacity coming onstream within the United States towards the end of calendar year '11, which will help our supply things. One of the things that has -- which is a factor here is the Bureau of Mines, I think it is, in the United States, BOM, but landmines. They have a storage amount of helium, which they have gradually been selling off, in which we own a portion of it, our competitors own a portion of that, and that amount is going away. And so we are going to become more reliant on foreign sources of helium globally, and the procurement costs for that is higher for these things, as we attempt to take these helium. It mainly occurs -- it occurs in gas fields and you strip it out and then you purify it. So it's -- it is something which we manage. We are the largest supplier of helium in the world, so it is a -- it impacts us a decent amount, but we also think that we have a good handle on that. It's just the need that prices are going to have to go up as we see higher costs for procuring the raw helium.

Our next question comes from Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas - JP Morgan Chase & Co: The equity income in the quarter was about $40 million, which was a lot more than it was in the first 2 quarters. How did things get so much better there and what's the outlook going forward?

The outlook going forward is for that to continue, Jeff. As we look at that, we think our Equity Affiliates, they're good solid businesses. We told you they got #1 positions in a number of markets. But the gains occurred in the Merchant area, principally Mexico and India. In the Tonnage area, we have some JVs in China, which are starting to contribute now as we build the plants and bring them online. And in our Electronics ventures, we have Electronics ventures with DuPont, which had a -- which had very good quarters and which we expect to also continue. So, yes, we expect this level of profitability to continue, and they will grow. Jeffrey Zekauskas - JP Morgan Chase & Co: Sometimes in the fourth quarter your payables steps up by $300 million, and sometimes it steps up by about $100 million. You've used a lot of working capital so far this year. What's the working capital outlook on the fourth quarter?

Well, the working capital -- if you're trying to get at free cash flow, then I give you from that. As far as the working capital, the payable steps up because the classification of the pension and our expectations over how much we're going to contribute within the next year. I would expect that our pension contributions in this year will not be as -- for -- in 2012, will not be as large as they were in 2011 or 2010. But that's a decision still to be made as we close out the year. There will be some pension contribution, but that's what causes the payables to step up. As far as overall, I think we've got a very good story on free cash flow for the year, though. And I expect -- and we had a very good quarter in this quarter, if you just look at that and you adjust some of the things about -- out about the operating cash flow. But we had free cash flow in excess of $100 million this quarter, and I would expect us to be somewhere $100 million, $150 million in the fourth quarter also. Jeffrey Zekauskas - JP Morgan Chase & Co: And then lastly, and you may have covered this, your pricing in Electronics year-over-year is plus 3. And in the old days, those numbers used to be 0 or negative 1. Why are the price realizations so much better now?

Simon?

Yes. Great question. So...

Former business here.

So as we talked to the Investor Conference, I think we are seeing a fundamental change in the Electronics business. So I'll talk about Electronics first. We did see very significant declines in pricing if you go back over the last 10 years. But we've definitely seen a stabilization of those larger volume, more mature products, and that's why we were commenting about stable pricing going forward. I did mention that, in fact, actually NF3 is up slightly year-on-year and sequentially, and what's offsetting that and bringing that to flat for Electronics is the great news that some of our new products are being adopted by our customers. What happens when we work out these new products, our customer is doing, let's say, a test quantity, we might be supplying from a small pilot plant, and we need a certain price. But for the customer to agree to adopt that product in full production, they need to have a price roadmap and understand where that's going to go before they commit to it. So we often, when we have our new product, we'll pre-renegotiate, let's say, a share of the savings, a price volume curve. So actually, seeing prices go down in those new products is very good because it shows that they're being adopted. So if you take the more mature products, slightly up. The newer products, slightly down. That's where Electronics is fairly stable. Of course, the other part of the segment is Performance Materials, where the team's done a great job of basically recovering some cost increases with some higher prices, and that's what's driven the segment.

We'll go next to Laurence Alexander of Jefferies. Lucy Watson - Jefferies & Company, Inc.: This is Lucy Watson on for Laurence today. Question on Merchant volumes. You mentioned a couple of times that they were slow in the U.S. and Europe. I just -- I'm wondering if this was relatively consistent across the quarter, or did you see gradual improvements or declines from month-to-month? And I guess also exiting the quarter as well, have you seen any change?

It was consistent across the quarter, Lucy, in volumes. As I said about the economy, we've -- we have seen the economy globally hit a little bit of a soft patch. it's not -- you can see that in the statistics there. Lucy Watson - Jefferies & Company, Inc.: Okay. And then in your -- the increased quarter-over-quarter in your Equipment and Energy backlog, it looks like it was mostly due to the addition of the new floating LNG facility.

That is right. Lucy Watson - Jefferies & Company, Inc.: Can you just, I guess, expand on us -- for us on the potential addressable market opportunities for offshore gas liquefaction facilities and then the expected timeline for this?

Sure. Okay, I'm sorry. And there are a number of projects, which people are considering as ways to explore a projects which are not onshore. This is an alternate to running a pipeline into shore to take the gas in and then liquefy it there. It also enables you to take smaller deposits and then to move the platform at some point in time, so you would do that. So as we look at the future for gas around the world, we see gas being more and more utilized as to make chemicals and also to make power. It has some advantages, as far as on the carbon side naturally with -- and with regard to the power, plus with the events of people -- with the events in Japan and the shutdown of nuclear power plants, we see more and more LNG occurring around the world. It may not come into -- probably will not come into the United States, but certainly, we're going to see more LNG coming to places like Europe. We're going to see more LNG coming to places like Japan, India, China, big market for us going forward in the future. Lucy Watson - Jefferies & Company, Inc.: Okay. And one last quick question. Does FX play a role in your forecasting for CapEx for next year, or is that just additional product -- projects that you'd expect to come onstream?

It does what? I missed it. Lucy Watson - Jefferies & Company, Inc.: Does currency play a role in the volume now?

Currency? No, no, no. Currency is -- do not play a big impact.

We'll go next to David Manthey of Robert W. Baird. David Manthey - Robert W. Baird & Co. Incorporated: It sounds like you think that the North American Merchant softness was broad-based, but do you feel that you lost any share, or is it just market weakness? Or was it just weakness where you are, or could you just go to a little detail there?

If I take a look overall, over this time period, over a longer time period and not particularly on to one quarter here, it exists, and we probably have lost some share in the United States. David Manthey - Robert W. Baird & Co. Incorporated: Okay. And then in terms of the backlog. The increase there, the 20% to 30% off the high end of the old range, it implies that projects are -- in the backlog, are starting to break loose. Is that the case, or are you also, at the same time, betting on winning more orders going forward? And then secondarily, if you can talk about that roughly $2 billion in CapEx, any comments on geographies or if it's hydrogen or where it's weighted?

Sure. If we just take a look at the CapEx here going forward, so -- in regard to backlog, like I said, I think the real number you got to look at is capital spending. And so it isn't so much of a projects trying to break loose, you put a project in the backlog and then you have a certain curve, which you spend the money on with things. And certainly, a bigger backlog is probably better for you, but the real number, what you want to see, is growth in CapEx. As we look at growth in CapEx for next year, if we look at the spending in '11, it's probably 40% in the Americas, 20% in Europe and 40% in Asia. We think that, that number starts to tilt more towards Asia, going forward here, although Americas still has strong growth for that because of the hydrogen projects, which we -- to which we're currently building. Europe probably tones down a little bit because we have 2 large projects which we are building there, and it hasn't been as strong. The Middle East probably picks up some things for us within the next year or so, as far as backlog's concerned, but I would say that we are going to see a more tilt in ourself towards Asia as far as the spending is concerned.

And just to clarify, Dave, too, that was capital spending that Paul mentioned could be up 20% to 30%, not backlog.

Yes, right. It's not backlog.

Not necessarily, okay?

Our next question comes from Peter Cozzone of KeyBanc Capital Markets.

You may have alluded to this a little bit already. But on the North American Merchant front, I'm just trying to kind of get some more color around if the operating issues you experience during the quarter may have impacted volumes, and to maybe what extent that might have accounted for some of the share pressure here during the quarter?

Yes, and the operating issues were not confined to North America. We had operating issues around the world. That's a broad comment on the Merchant segment.

But I think we would say, generally speaking, we're able to keep our customers supplied. Perhaps on the helium side, we mentioned supply limitations on the helium did impact growth opportunities there.

Okay. And then kind of as you look at 4Q here or in second half of calendar 2011. I'm just -- maybe could you provide some more color around the Electronics outlook, if you're hearing any indications from customers that would suggest anything than normal seasonality? And then also maybe on TV front, maybe some color as far as what you're hearing for the outlook for the rest of the year in that market?

Yes. Good question. So a lot of different things in Electronics. We acknowledged in our comments that we are seeing some subsegments that are little bit softer, particularly the foundry segment. I think TSMC has mentioned they see utilization rates down a little bit going forward. Kind of on the flip side of that is on Intel's call, they referenced, and I quote, "Increasing confidence in the second half of the year." We still see growth in TV and LED. Again, perhaps the growth rates are moderating a little bit. When we take a look at MSI, we had thought MSI for the year, and I'm going back to our comments back in October, was up 5% to 10% for FY '11 over FY '10. I think that we're going to see a little flatter back half of the year in the industry, and we saw a very strong second half FY '10. So when you put that together, we could see MSI growth, year-on-year, to be below that lower end of our range. Having said that, we still see some strength. Apple obviously had tremendous results. And as we've explained a few times, the pull-through from iPads and iPhones, both in terms of the computer chips in those devices themselves, but again the processing technology capability that has to be in the servers that are doing the math in the cloud, if you will, continues to drive business forward. So I think we should -- we see probably moderating, but no significant drop off at all going forward.

Okay. Kind of just a follow-on. You mentioned some new product wins in the Electronics business. Could you -- do you expect a meaningful benefit, I guess near term, on the volume from here as those products ramp up, or maybe also what type of margin impact do these new products generally carry?

Yes. And that's going to be a gradual impact, as they start to be deployed. And as we said, as our customer put them into full production. So they will have an impact with us over time, and we'll continue the growth of this business.

We'll go next to Mark Gulley of Ticonderoga Securities.

Paul, I thought the highlight of your prepared remarks was the increase in CapEx for next year. You've already talked about the geographic side of that, but going back to your Investor Day, I was struck by the fact that a lot of that new CapEx in Tonnage is going to go for oxygen for, let's say, coal conversion projects in China. So are you starting to see that ramp up next year? Is that adding to your confidence in oxygen for next year in Tonnage?

Yes. The simple answer, Mark, is yes. That's yes. We are seeing the orders there, and those are in that forecast.

Okay. Now does the forecast also include some more steel projects in emerging markets, overall?

Yes.

Okay. And then finally -- thanks for the short answers.

Pleasure.

With respect to the Merchant side. Half your sales and earnings -- we've had 2 straight quarters here now of some of bumps in the road. On the one hand, you're looking for more volume in the U.S., but is that going to be at the sacrifice of price as you have more feet on the street? And I guess in other areas, you're looking for more price in Europe. Could that contribute to some volume pressure there? So you face some kind of vexing trends to boost results in Merchant.

You're right. But that's why we pay people a lot of money to do this work, Mark. And not to be flip on that, but that's true. We have to balance, and I think we've proven we can do that. If you take a look at within the U.S., we think it's an issue of sales coverage and getting broader sales coverage out to certain accounts, and we don't think we have to go out and sacrifice price with that. With regard to Europe, as we said, there are also some accounts in which we look at and which if the price doesn't go up at, and we don't want to serve those accounts.

We'll go next to David Begleiter of Deutsche Bank.

This is James Sheehan sitting in for David. Paul, do you see anything sitting here in fiscal Q4 right now that would lead you to expect that you could not achieve your long-term growth, EPS growth forecast of 15% for fiscal 2012?

No. I think we are on track, as we've talked about at the Investor Day, and that we are -- and that we will continue to move forward. You're always going to have some bumps in the road, but we're going to manage our way through them. We're going to fix them, and we're going to move on and deliver the results.

So how much of that target depends on fixing the problems in Merchant Gases or on getting improvement, continued sustained improvements in Electronics?

Well, the Merchant business is a big portion of our business. It's about 40% of the company. So we've got to make sure that, that performs. So as you look at this, we got to make sure Merchant does a good job. I think you've seen the progress which we've made in Electronics and Performance Materials, very solid business are at levels of performance, which a number of people, over the years, have questioned if we could ever get even close to those levels of performance. And we think we can sustain that and continue to make it better.

So just with reference to this hot weather we're having in July. Do you see any impacts on that on the efficiency of your plants or in terms of higher electricity costs?

Yes, you're right. It does not help you -- it does not help the efficiency of our plants. Now the good news is I got a lot of it -- I got a lot of capacity here, because it cuts down actually on how much I can actually make.

Okay. And, Paul, can you just give me a little color on the -- on pricing in packaged gases in Europe? Is it getting stronger there?

The pricing in packaged gases is -- has been okay for us. I think it always could get better for us. The thing which we are not seeing is we aren't seeing -- we are not seeing the volume growth yet in Europe on packaged gases. The volume growth has not been good, just particularly in the south, in Spain.

That will come from Edward Yang of Oppenheimer. Edward Yang - Oppenheimer & Co. Inc.: Paul, you mentioned that you expect to -- or you're willing to shed some unprofitable customers in Europe. I was wondering how meaningful that could be. And second, you mentioned cement and combustion is 2 areas in Europe where you feel like you could gain some share, and I was wondering what your particular expertise there is relative to your competitors.

Yes. And with regard to expertise, it gets down to applications and it gets to particular areas. We do have a combustion lab, which is world class, which we can bring our customers into. And they can see -- they could see flame patterns. They could see how oxygen really will help them and make them better. Examples of that are our position and the success which we've had in the glass market, as an example for us, by taking the glass companies in here and showing how we can -- how -- what sort of things we can do to help them raise the efficiency and the environmental performance of their plants with regard to that, I mean. And as far as the -- on the customer side of things, I -- in the end, I think all of this has -- the impact of this is that it increases your margins. Our experience with this is you don't want -- you don't loose a lot of business by doing this. I'll tell you, we've gone through this in the United States years ago, of taking customers' prices up and you -- and pretty much you wind up getting the bulk of them up, and it comes down to the thing of it. You got to make -- at every customer, you got to be able to make a profit, and that's just the way it is.

Okay. So that wraps up, Augusta.

That does conclude today's conference. Thank you all for your participation.